The F1 Cost Cap and How it's Affecting Teams Like Red Bull

Since it was published by the FIA, the F1’s cost cap has been a topic of conversation. It was created after the first review into team spending, but it has brought to light a number of team breaches. Red Bull has been found guilty of breaking the financial regulations of F1 by overspending, whilst Williams and Aston Martin were found to be in procedural breach.

What is the F1 Cost Cap?

In 2021, the F1 put its first set of financial regulations into place, with the aim of encouraging a more competitive championship. It was hoped that, by putting a limit on team spending, the playing field would be level and teams had a fairer chance at winning. Instead of being limited by budget and resources, small teams could compete against those with big budgets. Whereas some teams had been spending up to $400m per season, the cost cap prevented this by limiting teams to a $175m spend. This was later reduced to $145m in light of the pandemic, when many teams were struggling. In 2022, the cost cap was set at $140m and there are plans to lower it going forward.

Red Bull Guilty of Breaking F1’s Cost Cap

The FIA, the F1’s government body, has found Red Bull guilty of breaking the cost cap regulations. Despite there being a $145m limit in place for 2021, Red Bull exceeded this. The offence was deemed ‘minor’, meaning that the cap was exceeded by less than 5%. No information has been released about how much Red Bull exceeded the cap by, or how they did so.

Red Bull issued a statement saying, “our 2021 submission was below the cost cap limit, so we need to carefully review the FIA's findings, as our belief remains that the relevant costs are under the 2021 cost-cap amount. Despite the conjecture and positioning of others, there is of course a process under the regulations with the FIA which we will respectfully follow while we consider all the options available to us."

As the breach has been classed as ‘minor’, there are a number of things that could be given as a penalty. This includes deduction of championship points for the season, suspension from one or more stages of a competition, limitations on aerodynamics and reduction of the team's cost cap.

The FIA said, "with respect to this first year of the application of the financial regulations, the intervention of the FIA cost cap administration has been limited to reviewing the submissions made by the competitors and that no full formal investigations were launched."

Christian Horner, Red Bull Team Principal, believes the team were under the cost cap for 2021. He explained, “we're very confident we're within the cap and within those financial regulations, so we've been shocked at the speculation and accusations that have been made by other teams. We wait for the FIA to conclude their process and we wait to see what comes out. Anything other than compliance we'll be extremely surprised at."

Red Bull have the chance to appeal the decision, and they can also enter into a 'settlement agreement' with the FIA. If this happens, the team must accept its guilty and the FIA will issue an appropriate penalty.