Silverstone given until tomorrow to accept Ecclestone’s ??370m offer

Posted on | Author Keith Collantine

Silverstone is the last chance for a British Grand Prix in 2010
Silverstone is the last chance for a British Grand Prix in 2010

Bernie Ecclestone has told Silverstone it has until tomorrow to accept his offer to host the British Grand Prix in 2010.

Silverstone has been left to pick up the pieces after Ecclestone’s attempt to take the race from them and give it to Donington Park failed. Just as it did when he tried to do the same thing with Brands Hatch a few years ago.

But will Ecclestone give Silverstone the same generous deadline extensions Donington had? By my count Simon Gillett got at least three extensions on his deadline to prove he had the necessary funding to complete the building work.

The British government continues to refuse to put any money into the race. This would be a reasonable position if it weren’t also throwing untold billions into the London 2012 Olympics money pit (and I say this as someone who lives in London and appreciates the scale of the regeneration work going on)

The ??9bn the British government is putting into holding the Olympics for one year would be sufficient to pay Silverstone’s 17-year deal 24 times over – supporting an event which is vitally important to Britain’s hugely successful motor racing industry.

The deal: 17 years, ??370m

Ecclestone’s offer is believed to be a 17-year contract starting at ??12m with a 7% ‘escalator’. (Some sources have reported slightly different figures, but these three seem to be the most widely accepted ones).

By my reckoning, that means the total value of the contract will be ??370m ($613m / ??412m) over 17 years. The final race of the deal in 2026 will cost ??35.42m.

It’s important to appreciate how much of a difference that innocuous-looking 7% represents. Far from it costing them ??12m per year to host the race, the circuit in fact needs that plus an average of an extra ??9.7m every year. Here’s how it breaks down:

Year Ecclestone’s British Grand Prix price
2010 ??12m
2011 ??12.84m
2012 ??13.74m
2013 ??14.7m
2014 ??15.73m
2015 ??16.83m
2016 ??18.01m
2017 ??19.27m
2018 ??20.62m
2019 ??22.06m
2020 ??23.61m
2021 ??25.26m
2022 ??27.03m
2023 ??28.92m
2024 ??30.94m
2025 ??33.11m
2026 ??35.43m
Total ??370.08m

Clearly, the deal would commit Silverstone to annual increases in fees far above the rate of inflation.

Given the economic conditions, who knows what’s going to happen to inflation over the next decade-and-a-half. The rate of inflation in Britain is slightly over 1% at the moment, so even if Ecclestone applied a far more realistic ‘escalator’ of 2% Silverstone’s total bill would be slashed by around ??130m.

Ecclestone says the deal is the most favourable offered to any circuit, but most other tracks – even those in Europe – enjoy some kind of government support. However the length of the Silverstone contract is atypical – the longest are usually around ten years.

Silverstone’s financial statement for 2008, published two weeks ago showed a slender profit of ??662,000 from revenue of ??38.2m. Even in a growing economy it would be hard to imagine where it could conjure up ??21.7m on average every year to pay Ecclestone. In the current climate it’s utterly unrealistic.

Will Ecclestone accept a lower figure? Will he give them more time to work out how they might meet these extraordinary fees? Or will he not even give them as much as a deadline extension? We’ll know on Sunday.

Read what you can do to help save the British Grand Prix. If you’re on Twitter, use the #savethebritishgrandprix hashtag and wear the Save the British GP Twibbon:

2010 British Grand Prix

110 comments on “Silverstone given until tomorrow to accept Ecclestone’s ??370m offer”

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  1. I’m just wondering.. What would happen to all that money? Where does it go? Not Ecclestone’s pockets.. What are Silverstone paying for?

    1. I’m guessing the teams share of profits, driver prizes and the likes. The FIA too?

      Then a big chunk goes back to FOM and its shareholders..

      1. It goes to pay off CVC’s debts that they took on when they bought the rights off Bernie.

        Which is odd as that means that Bernie’s sitting on a pile of money anyway. Bernie is of course hired by CVC to do their work (and that was probably part of the deal) but getting an extra £100m or so from Silverstone over 17 years isn’t really going to change much in respect of CVC’s debts. Bernie doesn’t need to stick to this deal, but, of course, he will.

        Power mad?

        1. How much debt is CVC still in despite all these new tracks that can easily pay Bernie’s fees?

  2. Well, what can we say.

    As most of us knew all along (right back to when Donington was awarded the contract safe in the knowledge they would not deliver)… Bernie will now get what he wants. No British GP and more money for him to do god knows what with for what price?

    I’m finding it very hard to not swear or use insults here.

  3. Update:

    Silverstone deadline set to pass without deal
    Friday 6 November at 08:31 : Nov.6 (GMM) The 48 hour deadline issued by Bernie Ecclestone is likely to pass without a deal for a 2010 British grand prix in place.

    It was reported earlier this week that the F1 chief executive was giving Silverstone bosses a “day or two” to sign his contract before the British race is pulled from next year’s calendar.

    The Times reports that the Northamptonshire track’s management was “surprised” by the ultimatum, which is now set to end.

    “Their puzzlement is such because they say Silverstone is waiting for Ecclestone to respond to amendments to the contract, not the other way round,” the London based newspaper said.

  4. Nice job by Damon to leak the numbers, pulled a page right off Max’s playbook, when Bernie is trying to him him/BRDC look the bad guys. If I run Silverstone the answer is certainly no, and don’t even need to waste a moment on it. The business plan that they have in place hasn’t factored in the GP for the next 17 years, so why saddle yourself with extra losses now?

  5. Sorry, but in the climate of everyone on F1 cutting budgets left right and center how can bernie think these kind of financial demands are appropriate?

  6. I think Keith hit the nail on the head in the article. Silverstone’s problem is that it is not ‘government funded’, pure and simple. The days of privately owned circuits hosting grands prix are long gone, they have simply been priced out of existence.
    When we look at circuits like Abu Dhabi, or next year’s proposed circuit in South Korea, it is totally way beyond anything a private organisation like the BRDC can come up with. The sword has two sides, and for Bernie Ecclestone, that also means keeping his new circuits happy. He knows that if he gives Silverstone too big a break, other circuits are hardly likely to want to pay his already inflated prices.
    For example, the Chinese event in Shanghai disclosed huge losses earlier this year, a circuit that enjoyed huge financial backing from Beijing when it opened in 2004. The list goes on and on, and extends to many European circuits also.
    For me, the real villians in this scandal is the British Government, who have never invested in Formula One since the day it began nearly sixty years ago. As Keith brilliantly pointed out, Westminster happily has invested in London 2012, and that huge ‘tent’ in East London which have both cost the British taxpayer billions in hard earnt money.
    The loss of Silverstone could quite easily fatally damage Britain’s role as a leading power in international motorsports forever. This goes far beyond national pride, but effects real jobs and real people that number in the thousands.

  7. Robert Cooper
    6th November 2009, 14:35

    I think in some ways we need a couple of years without a GB Grand Prix. So the government or whoever can actually build or at lest update a circuit that can compete (in terms of facilities) with other tracks.

    I mean lets face it. Wondering round Silverstone traversing the make shift toilets with the horrendous feeling that not only are you going to have to use them you are also going to have eat something from one of those vans and to top it off wash it down with a warm fosters Fosters that you probably half split cos the think that you used to carry four of them disintegrated.

    F1 markets itself as a glamorous and as such Silverstone, in its current state, doesn’t fit. So, as much as I dislike the little man he does have a point and hence why he tabled such a ludicrous contract.

  8. He is a greedy little troll, nay, a greedy little leprachaun trying to protect his little pot of gold. And I’m sure that that isn’t the only little thing about him.

  9. British GP out, Qatar GP in? I think so!!!

    This looks bleak.

  10. Very sad times for F1, boring tracks in obscure locations watched by people who know nothing of F1 while qouffing prawn sandwiches and compairing who`s got the most money, but what will happen to F1 when the money finds a new playgroud?, and dont believe for a second it wont happen. Least I`ve still got BTCC and Moto GP to look forward too. I think we`ve gotta face facts and accept that F1 is changing, personally F1 is losing its appeal to me as it is no longer about racing.

  11. That is an insane amount of money to host a race. Also dont the FIA get most of the hotel and other fees, so where do the tracks make the profits?

  12. Why will Bernie not put his hands into his pockets for once. He’s a billionaire for goodness sake and I’m sure earns much more than the asking amounts in interest alone.

    Brundle had a theory on the beebs F1 forum as to how he thought the negotiations might unfold. I can’t remember it exactly so wont repeat it and get it all wrong. Needless to say I’m desperately keeping my fingers crossed Silverstone will pull something out the bag but…

  13. Lets not over-analyse the situation regarding Silverstone and Ecclestone. It works like this inside Bernies mind. “We (CVC and Bernie) can make alot of money if we can get Silverstone to do this deal.” “We can control the race at Silverstone for years if we can get them to do this deal.” “Did I mention we can make alot of money if we can just get Silverstone to do this deal?” ……Cheers :-)

  14. Well that doesn’t look too good does it :-I

  15. BrokenBaculum
    6th November 2009, 20:49

    Having read many of the above comments, I am seriously hoping that Slverstone and the BRDC don’t sign. There are many good events that it can host without making a loss, such as Moto GP, BTCC, and they could possibly spend some of their F1 expenditure in attracting IndyCars to Britain. That would gain a massive crowd too.

    I care about what’s best for Silverstone, not F1. I am sick and tired of Bernie ripping us off, and the French, and the Germans, and the Belgians, and the Americans, and the Canadians, and the Australians, and the Italians.

    Those who seem not to be bothered are the Spanish, Monegasque, Malaysians, Bahrainians and the Abu Dhabites (?).

    The sooner Ecclestone and CVC Capital Partners are out of the equation the better. Unfortuantely that won’t be until a very long time.

    The repercussions of not having a Britsh GP will be huge: I suspect the teams will boycott many races, drivers may strike, and I reckon someone like Martin Brundle would quit in protest. It really is a sad state of affairs.

    1. BTW, Monco is free. They don’t get charged. Bernie has stated that, “Monaco brings much more to us than we bring to Monaco.” Go figure. Who says he doesn’t have a soft spot! :-)

  16. Well Bernie strikes again – amazing – its a pity another contract wasnt put forward – its the little guy glasses – £50,000 in readies ok? – and when? – only kidding Keith – he’s the biggest shark in the pond and would scare any other gangster.

  17. I think they should talk the deal for now. Cause most likely in 8 to 10 years bernie will keel over and then the rip off is over and then formula 1 is saved.

  18. He just taking too much money from the sport. I remember a while ago the teams wanted more money from the cvc but bernie said no. Cause he taking almost 70% of the profit from F1. He is just as bad as the Ceo of the corporations like Enron and tyco.

  19. Some extra figures:

    Whilst inflation is currently low the financial markets aren’t expecting it to remain low. Using figures on the Bank Of England’s website the markets expect inflation over the new 17 years to be average 3.5% per annum – so 7% is high but not as bad as you might expect. Using the figures from the bank of england then the I reckon the real value (ie. allowing for future inflation) is around £269m or £15.8m a year – still high but maybe not terrible.

    If you view the whole lot as an investment in government bonds (often said to be a risk free investment) then the present value is around £249.5m or around £14.7m a year.

    I’m not saying the contact is cheap. However, if we ignore the future inflation (or investment returns) then it will definitely look expensive.

  20. Time to draw the line in the sand. Better to have no race then be held hostage to extortionate fee demands. I have confidence that the BRDC will do the right thing and tell Bernie to stick his contract proposal where the sun doesn’t shine.

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