Jeremy Warner: Now the credit crunch hits Formula One

Outlook: Is nothing immune to the ever- widening embrace of the credit crunch? Taking a rare break from the dungeon, Max Mosley, president of the Fédération Internationale de l'Automobile, Formula One's governing body, went on the telly yesterday to say the industry will have to slim down its cost base dramatically following the decision by Honda to withdraw from the sport.

The industry as a whole, he implied, is rapidly heading into the pits. If another four teams were to throw in the towel, the very viability of the sport would be threatened, as in Mr Mosley's view it would be impossible to run the event with fewer than 14 cars. He didn't think this outcome likely, but he warns that teams may have to take the axe to costs to give the sport a viable future.

The Honda team alone is said to have been costing some $500m a year to keep on the road. With the motor industry in crisis across the globe, that kind of spending is no longer sustainable even for major auto-manufacturers.

Most of Formula One's teams are independents, but even they are being badly squeezed by the downturn in corporate sponsorship. Many of the industry's top sponsors were credit-crunched banks. There could also be pressure on the share of revenue the teams get from media rights.

No volume car producer is ever going to enter the sport while costs remain so high. To stay in the game, the teams need to start looking at not so much belt tightening as starvation dieting. Mr Mosley aims to begin the process by introducing a standardised engine and gear box. In his view, annual costs per team need to come down to around £30m, or a tenth of what some may now be spending, to underpin the sport's future.

It's scary stuff, and it's not going to be easy for an industry which has always lived high on the hog and whose very name stands for glamour and opulence. More worrying, the latest traumas threaten to shatter one of Britain's few remaining centres of high value-added manufacturing excellence. The M40 corridor from London to Birmingham, sometimes referred to as Motor Sport Valley, is said to contain the highest concentration of precision engineering anywhere in the world. A large proportion of this work comes from Formula One.

No one is going to shed a tear for the likes of Jenson Button and Lewis Hamilton. Whatever happens, they are unlikely to be falling back on the Government's newly announced mortgage relief scheme. Yet there are 15,000 other jobs, most of them in Britain, that rely on Formula One, and for many of them the future looks bleak. They may have imagined they were protected from the chill winds of the global downturn. Sadly not.