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Formula 1 to impose $175m cost cap on teams in 2021

Formula 1 will impose on teams a cost cap of $175m a year from 2021 to 2025, with the measure inscribed in the sport's newly created Formula 1 Financial Regulations that will exist alongside the FIA Sporting and Technical regulations.

The long-awaited limit on spending, that will force F1's top three teams - Mercedes, Ferrari and Red Bull - to reduce their budgets, was devised by former Brawn and Mercedes financial executive Nigel Kerr.

Kerr was hired by F1 managing director Ross Brawn to design a viable schedule of cost cutting measures.

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The $175m limit shall be in force for five seasons, from 2021 to 2025, but will include a provision allowing the level to be adjusted upward for inflation.

F1's top teams initially sought a higher number to be implemented from 2021, with a multi-year glide-path down to $150m.

However, while the final figure is a feasible compromise it also excludes several significant items from a team's budget.

The $175m number will not include driver salaries or the salaries of a team's top-three executives. The figure also discard engine costs and marketing expenses.

It's unclear how Formula 1 and the FIA will police the mandatory cost cap, but the regulations will allow for the application of penalties - such as loss of championship points or a removal a team principal's FIA licence - for those in breach of the covenants.

Formula 1 has proposed a "dry run" in 2020, when teams will be invited to open their books for a control and audit procedure but without any regulatory constraint.

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Phillip van Osten

Motor racing was a backdrop from the outset in Phillip van Osten's life. Born in Southern California, Phillip grew up with the sights and sounds of fast cars thanks to his father, Dick van Osten, an editor and writer for Auto Speed and Sport and Motor Trend. Phillip's passion for racing grew even more when his family moved to Europe and he became acquainted with the extraordinary world of Grand Prix racing. He was an early contributor to the monthly French F1i Magazine, often providing a historic or business perspective on Formula 1's affairs. In 2012, he co-authored along with fellow journalist Pierre Van Vliet the English-language adaptation of a limited edition book devoted to the great Belgian driver Jacky Ickx. He also authored "The American Legacy in Formula 1", a book which recounts the trials and tribulations of American drivers in Grand Prix racing. Phillip is also a commentator for Belgian broadcaster Be.TV for the US Indycar series.