Why F1's furlough debate isn't as clear cut as in football

International sport may have been placed on hold as the COVID-19 pandemic continues to impact all aspects of life, but there has been no shortage of news. Motorsport has continued to tick over as it negotiates the various challenges thrown by the ever-changing situation, with the burgeoning Esports scene offering drivers and fans a way to get their racing fix.

But most of the back-page headlines have come from football, where an ongoing tussle involving players, clubs, the Premier League and the British government continues to unfold over pay cuts and furloughing.

A handful of Premier League teams have taken advantage of the government's furlough scheme to try and protect jobs, only to face widespread criticism. The outcry was such that three teams have reversed their decision.

So with five British F1 teams - McLaren, Racing Point, Renault, Williams and Haas - also taking similar action, furloughing a number of their staff, can a similar ethical argument be made against their decision?

In the wake of the COVID-19 pandemic, the British government launched a furlough scheme that would see it cover 80% of employees' wages for companies, up to a cap of £2,500 per month. It is intended to support businesses through anticipated economic difficulties while the country remains on lockdown, and protect jobs for once the crisis is over.

"This scheme is designed for struggling businesses," culture secretary Oliver Dowdon explained, "to make sure, if they are faced with the position where they have to make staff redundant, rather than making them redundant they furlough them on 80% of their wages so they can bring them back when business picks up."

Five Premier League clubs took advantage of the scheme, furloughing the majority of their non-playing staff. These were Liverpool, Tottenham Hotspur, Bournemouth, Norwich City and Newcastle United.

The decision sparked outrage. Critics said it was a way for club owners to try and save some cash rather than actively protect their businesses, with the tax payer ultimately picking up the bill in the long-run. Liverpool recorded profits of £42 million last year, while Tottenham was in the green by almost three times that figure at £173m.

"Football clubs should only be using it as a last resort," said Dowdon. "I think the fans and the public at large are going to take a pretty dim view if they're not using it except in the last resort."

"Putting our people on furlough was for myself one of the most difficult decisions or things I've had to do in my working life" Andreas Seidl

The backlash was such that Liverpool, Tottenham and Bournemouth have all taken a U-turn on their decisions in the last week. Newcastle and Norwich are yet to make any changes to their call.

"I've made that pretty clear, this scheme wasn't designed for the people who have millionaire players and billionaire owners," stressed Dowdon. "People should take responsibility, clubs should take responsibility."

F1 is a sport also featuring "billionaire owners". McLaren is owned by the Bahrain sovereign wealth fund, which has assets totalling $18.8 billion. Racing Point is owned by Lawrence Stroll (pictured below), who according to Forbes has a net worth of $2.6 billion. Renault is one of the biggest car-makers in the world. All three have furloughed staff in recent weeks.

F1 itself as a company has also put around 50% of its workforce on furlough and introduced pay cuts for its top earners. It made a $17 million profit in 2019 on a revenue of over $2 billion. Greg Maffei - the immediate boss of F1 CEO Chase Carey - earned over $44 million overseeing Liberty Media's various major investments in his role as CEO and president. These are perhaps not the kind of companies the government had in mind when it launched its furloughing scheme.

Asked by Autosport about McLaren's decision, team principal Andreas Seidl explained the uncertainty over the future financial outlook for F1 made it a necessary action.

"It's still not clear yet, it's simply impossible to know what the financial impact will be of this crisis," Seidl said. "We know that we are not going racing at the moment. We know that we will miss income this year, and this is why we had to put different measures in place in order to make sure we are protecting our people, protecting the team to be in a position that once this crisis is over, to restart again in the best possible shape.

"One of these measures was putting our people on furlough, which was for myself one of the most difficult decisions or things I've had to do in my working life, telling our people to be on furlough and taking also pay cuts.

"But we were clear together with Zak [Brown, McLaren Racing's CEO] that it's a decision we had to make again to make sure we protect the team as good as possible."

Seidl is correct in highlighting the uncertainty facing all F1 teams over their income this year, with the delayed start to the season and the inability to predict just when racing will resume making accurate financial forecasts difficult.

F1's $2.022 billion revenue in 2019 was principally made up of broadcast fees (38%), race hosting fees (30%) and sponsorship (15%). Of this figure, $1.012 billion was then paid to the teams through prize money in varying sums from around $50 million to north of $200 million, depending on championship performance and bonus agreements in place. It is here the trickle-down impact can be seen.

Each cancelled race (bar Monaco, which pays no fee) is thought to cost F1 between $30m and $50m. The hosting fees pot takes a hit each time, meaning there is subsequently less that can be paid to the teams.

The same is true for broadcast fees, an even bigger contributor to F1's overall revenue. It is understood that if the calendar drops below 15 races, broadcasters will receive a partial refund - so again, that pot would be reduced, and have a knock-on effect on team payouts.

The Premier League is facing a similar struggle. The 20 clubs make around £5 billion between them, 60% of which comes from broadcast revenue. For as long as the season is on hold, question marks will linger over just how big the pot will be, with the league recently estimating broadcast losses would hit £762 million.

F1 teams have far fewer big earners than Premier League teams - meaning a similar kind of saving is simply not possible

The difference between F1 and football, though, is the international element. For the Premier League to resume, it will depend on the decisions taken and the limitations put in place for just one country: Great Britain. There are hopes of getting football back underway as early as June, cramming the remaining games of the season into a 56-day schedule behind closed doors at a series of bio-secure locations.

F1, naturally, cannot begin to even dream of such a possibility. It has teams with bases spread across the UK, Italy, France, Germany, Switzerland, and the USA. It needs to stage eight races across three continents for 2020 to count as a world championship. And while a race without fans in Europe is a possibility to get the season underway, there would be numerous hoops to jump through to make it happen.

There can be no certainty of when F1 will return, or in what state, meaning the teams must brace for a big financial hit. AlphaTauri team boss Franz Tost recently estimated each missed race would cost midfield teams $2 million.

Even with the delay in the new regulations to 2022 and the carryover of the existing cars to next year, the running costs for teams are such that there are serious fears not all 10 will make it through to next year.

"It's not just a fear, I think it's reality: there is a big risk that we could lose teams through this crisis," said Seidl. "We don't know what the income will be this year. We don't know when we will get back to racing again."

FIA president Jean Todt is also wary of losing teams from the grid given the non-essential nature of motorsport programmes for teams and, in particular, manufacturers.

"That's why we must listen to everybody, even the big ones," he told Autosport. "You must never take anything for granted. So we must consider everything. We must be humble, we love [motor racing] but it is not essential for society. So we must make sure that we make proper choices, proper decisions."

Another key difference between the F1 and Premier League models is the outgoings on wages. Player wages make up around 50% of outgoings for clubs, with players earning an average of £61,000 per week. It is for this reason clubs have been engaged in talks with their players over possible pay cuts, seeing it as an alternative and fairer way to save money where needed without resorting to furloughing staff.

The Premier League is anticipating an economic impact of £1.14bn due to the crisis, half of which it hopes to mitigate by suggesting players take a 30% pay cut. While the five F1 teams furloughing staff have also enacted pay cuts with their key personnel to try and save money, they have far, far fewer big earners than Premier League teams - meaning a similar kind of saving is simply not possible.

F1 teams have been warning about the sustainability of the sport for some time, hence the push for the new financial regulations and budget cap that will come into force next year. While many of the parent companies turn profits, the F1 teams themselves rarely break even - but for some, that is enough so long as it keeps them racing and keeps them competitive.

The hope was that the budget cap would help create a new F1 business model where teams could focus on not just racing, but also turn profits. But now it is a question of survival, explaining the new drive to push the budget cap, originally set at $175 million, to as low as $100 million.

"I think the crisis we're in now is the final wake-up call that the sport which was unhealthy before, and not sustainable, has now reached a point where we need big changes, drastic changes," Seidl said.

"We would like to see the budget cap as low as possible. We have put out the number of $100 million, which is something we would be in favour of.

"I clearly see a commitment from everyone, understanding that we are in a big crisis and that we have to make big decisions to make sure we protect the teams and protect Formula 1."

While the budget cap may pave the way for a healthier, more sustainable sport from next year, it still won't help teams through the peak of the crisis in 2020. That requires other steps, such as furloughing staff and cutting salaries.

"We are optimistic that all these measures we're putting in place at the moment will help us to survive that crisis" Andreas Seidl

"For this year we need other short-terms measures like said before, like freezing the cars, etc, in order to save costs," Seidl said. "We are putting all measures in place which we think are necessary in order to get through this crisis. There have been pay cuts that we've put in place. We have put some people into furlough. These are things happening on the salary side.

"Something which is helping us a lot is the agreement we have with the other teams, with the FIA, to be on shutdown at the moment. I think also the decisions we're taking together with the FIA in terms of freezing the cars will help to save costs for this year.

"We are optimistic that all these measures we're putting in place at the moment will help us to survive that crisis."

Survival is the name of the game for teams in F1 right now, a challenge made all the more daunting by the total uncertainty as to how 2020 will look financially.

As painful as short-term measures such as furloughing staff may be for teams, the hope is it will help keep them on the grid, consequently protecting those jobs - and the teams themselves - through to the other side of the crisis.