Loss of Silverstone to Affect Local Economy

The shockwaves generated by Bernie Ecclestone's decision to scrap the British grand prix rippled out yesterday to touch every corner of the country's motorsport industry, threatening Britain's position as the global centre of international motor racing.

The move by Ecclestone, the formula one commercial rights holder, has threatened to destabilise an industry worth £3bn and has implications for companies large and small, whether directly involved in the sport or not. Silverstone's grand prix contributes about £40m annually to the local economy in the Towcester region and its loss from the 2005 calendar will be felt in the till of every pub and restaurant in the area.

Britain's entire motor racing infrastucture, ranging from small specialist formula Ford makers such as Van Diemen in Norfolk through to multimillion-pound front-line formula one teams such as Williams and McLaren, have all benefited from the "halo effect" of being associated with the grand prix.

"It is widely acknowledged that the British grand prix makes a significant direct contribution to the UK economy each year and that it is an important flagship for the hugely successful British motorsports industry," said the Motor Sports Association chairman John Grant. "We seem to have arrived in the situation where a funding shortfall of some £2-3m a year is standing in the way of retaining an iconic event which is vital for our sport."

Alex Hooton, chief executive of the British Racing Drivers Club, which owns the circuit, warned that the race's cancellation would have a serious knock-on effect on the group of companies that make up "motorsport valley" between Cambridge and Oxford.

"If we lose the race for only a year or two there will be a major impact on tourism-related industries in the immediate area but it will have less of an impact for the motorsport industry," he said. "However, over time, if we do not get the grand prix back then there is going to be an erosion of the motorsport industry in the surrounding area.

"We're confident that it will come back to Silverstone, and we will continue to analyse the redevelopment options of the circuit, which will be a major investment of between £80m and £100m."

Tony Purnell, the Jaguar team principal, said the effects would not be felt immediately. "But in the medium to long term I think it's going to be as if one was diagnosed as suffering from a serious illness," he said. Purnell himself is currently battling to find a buyer for his beleaguered formula one team, which will otherwise close at the end of the season. One knock-on effect of that is to put Eddie Jordan's team under threat, reliant as they are on engines supplied by Ford, Jaguar's parent company.

One local councillor assessed the loss to the local economy close to Silverstone at as much as £50m a year, taking into account the income from pubs, bed-and-breakfast facilities and restaurants. As always, it will be the smaller traders who are the most vulnerable.

"The grand prix certainly does have that halo effect," said Purnell. "It adds image and prestige to the entire motorsport industry. It's also inspirational in the sense that I suspect there will be less interest, in the long term, from young engineers to make their career within the industry."

Dick Bennetts, who runs the independent team West Surrey Racing, which this year contested the British touring car championship with two MG saloons, is another who appreciates the benefits of the British grand prix as an international calling card for the sport as a whole.

"I'm not involved in formula one," said Bennetts. "But I always go to the British grand prix, perhaps meeting up with a potential sponsor who I think might be interested in becoming involved with us. In that sense, the British grand prix is a calling card for the sport."

There is also a sense of indignation within the sport's community that the government has not been more robust in its support for the grand prix.

"When Ford announced that it was planning to close its famous Browns Lane manufacturing plant in Coventry, Tony Blair stood up and said he would do all he could to help," said one formula one team executive yesterday. "That involved about 400 jobs. If Jaguar's formula one team and Cosworth should go down - and, heaven forbid, take Jordan with them - then we'd be talking about another 1500-odd redundancies in the area between Milton Keynes and Brackley. Plus the problems of all the small subcontractors who service them."

Impact on the community:

CEO at Whittlebury Hall, the nearest hotel to Silverstone

I'm very shocked and very disappointed. It's going to have a detrimental effect on the hotel, though it is not dependent on the grand prix. It's not so much the financial loss but the prestige. The drivers stay at the hotel and have their regular bedrooms. But I think the much bigger issue is for the local economy because there are so many people who are dependent on the grand prix.

Derek Mapp, Chairman East Midlands development agency

We have been involved with this for some time so it's not come as a major shock. However, the show is not over until the fat lady sings and she hasn't sung yet; we have until October 13 to resolve the matter. The grand prix contributes around £40m to the local economy. A lot of hotels and businesses will be affected but this is not the end of motorsport at Silverstone, it's the proposed end of formula one.

Chris Knapman, Collectors Carbooks

We take quite a few thousand pounds over a grand prix weekend which, presumably, we will now lose. A lot of people also wander in off the street, having seen Silverstone on the map and thought, ooh, I've seen the race on the telly, so hopefully they will buy a book as well. I suspect we may have to ask for a reduction in the rent.