Motorsport is racing back into the public consciousness as Formula 1 revs up its engines for the start of the 2023 season. After the excitement and drama of the 2021 season, 2022 was fairly processionary. However, with the launch of new cars, new teams and other changes on the grid, excitement is starting to build for another epic battle this year.
Amid all the hype and excitement is the UK’s continued position as the global crucible of the motorsport sector. 6 of the 10 F1 teams are based in the UK, and most of those not based within 50 miles of Silverstone have facilities of some sort. In the post-Brexit, recessionary (are we technically in a recession??) world the UK finds itself mired in, racing cars and bikes continue to be one of our most stable and prosperous exports.
Growth in viewership for motorsport has boomed in recent years. The Hamilton v Verstappen drama. The “Race to Survive” Netflix series. The explosion of American demand led to three US races in the 2023 F1 calendar. New races have been a real boom to the engineering sector keeping the wheels turning.
However, behind the razzamatazz, the marketing façade and the lavish lifestyle portrayed on TV, a new report has revealed a series of warning signs that may indicate not all is well in the UK Motorsports sector.
The new Plimsoll Analysis reveals that the number of UK-based motorsports companies in financial difficulty is rising alarmingly. Plimsoll’s unique reporting has rated 9 out of 10 previously failed businesses as Danger or Caution up to 2 years prior to their demise.
Having financially rated each of the UK’s top 400 motorsports businesses, there are 156 companies that have been given a Danger or Caution rating in the latest Plimsoll Analysis:
Despite the explosion in viewing figures and participation, the number of UK-based motorsports businesses that are in financial difficulty continues to grow.
116 companies have been given a Danger rating – our most urgent warning of looming financial distress. These companies must make urgent improvements to their financial health to avoid further jeopardy.
Conversely, the number of motorsports companies receiving a Strong rating in the latest Plimsoll Analysis has edged slightly higher in the latest year to stand at 161.
What is causing so many Motorsports companies to be in trouble?
The latest Plimsoll Analysis shows that the motorsports market appears to be in rude health in 2023. Based on our latest assessment of every company up to their latest trading period:
Growth in the latest year 15%
Profit Margins in the same period 5%
So, what is causing such a disparity in the market? Sadly, the answer to that question has been decades in the making. One issue is the cost of people. The motorsport sector has long struggled to attract enough highly-skilled engineers of sufficient quality. The expansion of education in precision and hi-tech engineering at British universities is filling some of the gaps but the cost of operations is becoming problematic. Engineers with aerodynamic, mechanical and materials specialities are in high demand from other sectors. Without exorbitant pay offers, how do motorsports companies compete for talent?
Elsewhere, input costs for all motorsports companies have soared. From shipping to fuel, carbon fibre to semiconductors, the cost of racing has become prohibitive. With inflation still comfortably in double digits, how long can companies continue to absorb these high running costs?
The growing disparity in wealth in motorsports allows some to absorb these costs better than others. Keeping a close eye on those rival companies that are pushing the financial envelope too far is an integral part of any business strategy.
Plimsoll’s latest analysis takes the 400 largest and most important companies in the motorsports market and delivers an instant, visual health check on each. Poaching talent and materials from businesses on the precipice could be an unfortunate reality of the sport in 2023.
For more information on Plimsoll’s latest assessment of the motorsports market, please click here.
