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

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.

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2010 British Grand Prix

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

  1. 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?

  2. 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…

  3. 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 :-)

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

  5. BrokenBaculum said on 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.

    http://www.youtube.com/watch?v=KOm2U6zjQGQ&feature=related

    • 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! :-)

  6. 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.

  7. TimmyA said on 6th November 2009, 22:46

    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.

  8. TimmyA said on 6th November 2009, 23:26

    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.

  9. MarkS said on 7th November 2009, 2:47

    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.

  10. 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.

  11. Jonty said on 7th November 2009, 17:25

    The BRDC is (as far as I know) a members club and therefore must have trustees who are responsible for safeguarding the members’ financial interests.

    It could be argued that it would actually be criminal for them to agree a deal that would probably bankrupt the club in a few year’s time. If they sign and try to back out after a few years they would be sued by Bernie etc. for millions and millions.

    What we actually need is more good motorsport on television, not necessarily F1. Most other racing is much more exciting than F1 except that we have not learnt who the drivers are and so do not know who to support!

    Who’s going to promote some other dividion properly?

  12. maiesky said on 7th November 2009, 17:53

    I am not from UK (Poland) and have to admit you are lucky to have several champions, now back-to-back.
    You have several racing track within UK and it is quite easy to attend F1 race for you.
    Now you are in danger that f1 will withdraw from UK.

    The hell he must be crazy to request £370m !!!
    I wish FOTA will withdraw from $$BernieF1 circus.
    Don’t get on your knees and do not accept this offer from that *******!

  13. How did this story finish? One day is over..

  14. jonsands said on 7th November 2009, 22:11

    we all Mr ECCLESTONE that F1 STARTED in Britain & if there is no British G.P then there should be no G.P,s at all

  15. A Sceptic said on 8th November 2009, 1:42

    Let’s face it; none of this wrangling is about what’s good for F1, or for the British Grand Prix. This is only about what’s good for Bernie Ecclestone. If it was, Silverstone would have been off the calendar a long time ago in favour of much more interesting tracks like Donnington or Brands.

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