Sponsership Dry Out

Sponsership Dry Out

The Formula One corporate hospitality machine cranks up into top gear this weekend for the Hungarian Grand Prix, where team sponsors will be plied with as much champagne and canapés as they can consume.

But behind the carefully erected displays depicting past F1 glories and photographs of cars brandishing the sponsors' logos, the team bosses are in a spin.

Sponsorship money, which makes up around 70 per cent of a team's multi-million pound budget, is running dry.

Mid-August is traditionally the time when the teams hit the phones to seek out fresh sponsors for next season. But many calls aren't being returned. Potential sponsors, hit by the slowdown in the economy, are cutting costs. While F1 sponsorship has been proven to be one of the most cost-effective forms of marketing, justifying upwards of £6m investment to the board never mind shareholders isn't easy.

"It's going to be a very tough winter," says Jim Wright, commercial director of Williams F1.

"Any sponsor that's not already signed up will be very difficult to hang on to."

The Oxfordshire-based team is itself searching for a replacement for WorldCom, the collapsed telecoms company. But Williams is a top-tier F1 team. Along with Ferrari and McLaren, it can command the highest rates, secure sponsors that will provide valuable resources such as BMW engines and HP computers and receive maximum television exposure.

Further down the field, the sponsorship drought could put some teams out of business.

"It will inevitably hit the weaker teams," says David Richards, team principal of BAR, owned by cigarette company British American Tobacco, its major sponsor. "The smaller teams that negotiate contracts on a yearly basis will really feel the brunt of it."

Jordan F1, owned by Irishman Eddie Jordan, is one team that may struggle. Although its sponsors are usually tied in for at least three years, the company's two main backers Benson & Hedges and DHL have options to end their...

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