17 July 2017: Silverstone, the hosts of one of the UK’s biggest motor racing events, have triggered a break clause to end their contract with Formula One with the last race to be held in 2019.
Losses have mounted year on year for the owners of Silverstone to host the Formula One weekend. Last year alone they lost £4.8m on that single weekend and £2.5m in 2015. The majority of the losses have been put down to the huge annual fees that they must pay Formula One under the terms of the contract to host the event.
The 17 year contract entered in to 8 years ago provided for an annual fee increase of 5% that would have resulted in annual fees growing from this year’s £16.2m to £25m in the last year of the contract, to the detriment of Silverstone.
The lessons to be learnt for all businesses here is that just because you have a big brand or headline client doesn’t mean it makes good business sense. Whilst it might be good for your brand, is it good for your bottom line? Can you afford the tighter margins, onerous terms and is it going to be the straw that breaks the camel’s back?
No doubt Silverstone will come back with a pitch to Formula One for better terms in a new contract but they have been bitten once and will certainly be cautious of any subsequent deal that is tabled.
If you wish to discuss an onerous contract that is dragging your business down then please contact any of the BRI management team to see what your options are to restructure that deal and/or your business.