Silverstone on track to pay £20m annual F1 fee

Silverstone recently unveiled new pits and paddock (PA)

Silverstone, the Northamptonshire-based race track, will have to pay almost £20m annually by the end of the decade to host Formula One's British Grand Prix, according to new research. This comes after it emerged that the BBC is considering dropping its coverage of F1 racing, because of the cost of the rights.

The £20m sum demanded of Silverstone is 64 per cent more than the fee paid to host this year's race, which takes place on July 10, and it will make it increasingly difficult for Silverstone's owner, the British Racing Drivers' Club (BRDC), to turn a profit.

In December 2009, Silverstone signed a last-minute 17-year deal with F1's boss Bernie Ecclestone to prevent the British GP from being cancelled after Leicestershire's Donington Park circuit failed to honour a contract to host the race.

Under the deal, Silverstone agreed to pay £11.6m, its highest-ever fee for hosting the race. The key concession is that this fee escalates by 5 per cent annually instead of the 10 per cent which is applied to most other F1 circuits.

Last year Silverstone had a near capacity crowd of 115,000 on race day and record-equalling attendance of 105,000 for qualifying. This gave it the highest attendance of all F1 races in 2010. But, despite this, the BRDC reported a £1.9m loss for the year, down from a £1.3m pre-tax profit. The loss was due to the F1 fee which is still accelerating.

According to projections in the latest edition of the F1 industry guide, Formula Money, which was released last month, Silverstone's fee comes to £12.2m this year and will hit £18.9m in 2020, rising to £19.9m in 2021.

Silverstone has to cover this cost from ticket sales alone since the sport's rights holder Delta Topco, which is majority owned by private equity firm CVC, takes all revenue from F1 broadcasting, trackside advertising and corporate hospitality. Projections by Formula Money show that by 2020 the cheapest tickets to the British GP will cost £195, up 31 per cent on this year, whilst the most expensive will sell for £475.

Silverstone is one of only two F1 circuits which gets no government funding and in the past four years it has made a profit as often as it has suffered a loss. Any shortfall is covered by the BRDC which is a private company, limited by guarantee, with 850 members including star drivers Jenson Button and Nigel Mansell.

In April 2010, Silverstone took out a £26m loan with Lloyds Banking Group to fuel development and last month it opened a new pit and paddock complex. The BRDC has engaged the corporate finance arm of PricewaterhouseCoopers to secure new investors for future developments at the circuit which it is believed will include a hotel, new driver training facilities and a visitor attraction.

This follows news that the BBC may not renew its contract to broadcast F1 in the UK when its contract expires in November 2013. The current cost of £60m a year makes it the corporation's most expensive programming.

The cost meant it was more than the entire budget of its digital channel BBC4 for the year with the races only attracting up to four million viewers. The BBC is currently looking to slash 20 per cent from its budgets by 2014.