FIA says budget cap makes it difficult for smaller teams to compete
Since 2021, a budget cap has been in place with the aim of limiting excessive development. However, the FIA is seeing some side effects.
Formula 1 is governed under an annual budget cap. Since its introduction in 2021, teams must control their expenses to avoid any sanctions. This budget cap includes all financial aspects of a stable: car development, breakdown, simulator, salaries, etc…
The objective of this limitation is to establish a stable financial platform and to prevent the largest groups from injecting astronomical sums, unlike the smallest ones. In case of overrun, the teams are directly sanctioned. Red Bull paid the price in 2022 for exceeding the budget for the 2021 season. The Austrian garage was hit with a one-year reduction in wind tunnel time and several thousand euros in fines.
Frame the large groups
The main goal of tightening the grid seems to have worked. If the leading constructors took off easily, the other teams regularly found themselves at the mercy of their rivals. However, this budget cap can be very restrictive in case of accidents or breakdowns. The teams are more limited and cannot always operate a redesign of the single-seaters. In the event of a major accident, the cost of the damage can quickly rise and eat up a part of the allocated budget.
« The problem with financial regulations is that, on the one hand, they mean that someone can’t spend three times more than someone else, which is a good thing, conceded Nicholas Tambiazni », the relay of FIA President Mohammed Ben Sulayem. « But on the other hand, it also means that if you are behind someone, you can’t put everything into place and proceed with an upgrade. »
With this reform, teams like Mercedes and Ferrari were not able to re-challenge Red Bull. The performance difference being too significant for « simple » improvements to allow the two teams to catch up. Unlike before 2021, the two manufacturers were not able to completely modify everything during the season to regain competitiveness.
« In the past, some teams would sometimes start a season and find themselves in a very bad situation », the Greek engineer explained. « The stables arrive and are in difficulties the first races but then they simply put together a massive upgrade package for Barcelona or Canada. You virtually redesign the entire car like crazy for three or four months to become competitive again during the season. The current financial regulation limits the number of upgrades you can make. So, if someone is further behind, the recovery can be quite long and painful. »
Make adjustments for 2026
The FIA knows that all reforms have their disadvantages. This budget cap is primarily a guarantee to avoid uncontrollable expenses and an untouchable top tier every season. To offset the side effects of this regulation, the Federation is working on new adjustments to apply during 2026.
« There is a delicate border between too much and not enough and it is clear that it is a technological sport, and must remain so », justified Nicholas Tombazis. « But with too much freedom, there are potentially very large gaps between the cars. Obviously, if you ask an engineer from a team, he will tell you that there are too many limitations. I myself am an engineer, I would love for all the cars to be a real technological battle. But we must consider that there are other factors in play that are important for the sport. »
The Greek engineer also estimates that this reform prevents teams from staying at the helm of Formula 1 for too long, as Mercedes did from 2014 to 2021. « Compared to the olden days, where there might have been a bit more freedom, we have financial regulations and we also need to try to limit some of the activities that occur », he added. « You might have teams that create an advantage through an R&D project, and then maintain an advantage for a very, very long time, without any chance of the other teams catching up. There is this boundary between freedom and having a competitive championship, and financial regulations. I don’t think there is a perfect answer. »
Since its establishment in 2021, the budget ceiling has only penalized Red Bull and it was for the inaugural season.
