Formula One: RBS does the inevitable - byebye F1

No one knows exactly how much RBS paid Williams for sponsorship rights. But rumour has it that it was around GBP10 million per year. For teams that raise money in pounds but spend in US dollars, that amount had already been eroded by some 40% as a result of the decline on the pound.

Now even that is lost to Willams as RBS, which has been in a high-speed crash that's so far lasted two years and has yet to come to rest, reports the highest loss in British corporate history.

Across the company, spending is being cut - and that means no more junkets to sporting events, hugely reduced advertising budgets for hoardings at all manner of sports venues, possibly cutting sponsorship deals for sporting series and - not surprisingly - the budget for advertising on Williams F1 cars.

However, RBS is not pulling the plug right on the Williams deal right now: it is scheduled to run until the end of the 2010 season and RBS has made it plain that current plans are to honour the agreement. But other expenses are being heavily curtailed.

Andrew McLaughlin, RBS Group Director, Communications, said yesteday: “We recognise that we are now operating in a very different economic environment and have been reviewing all of our activities since October. It is imperative that we respond to the reality of the situation we face and that we do so in an orderly way that respects the commercial agreements we have in place and the implications for our partners and the jobs they support. Throughout our relationship, Williams have shown great understanding and innovation in driving the programme forwards. They have been very supportive in finding ways to reduce costs over the remainder of our contract. This early announcement allows Sir Frank Williams and his team to plan ahead financially.”

A joint statement from the team and RBS included a number of notes that make it clear that RBS is pulling out of many advertising and sponsorship deals where it can do so without legal or financial consequences:

1. RBS is reviewing all sponsorship activity as part of its Strategic Review.
2. This will result in a 25% reduction in sponsorship and related costs in 2009 and around 50% by 2010.
3. Non contractual costs (F1) have already been reduced by over 50%.
4. RBS has made further savings by cancelling trackside advertising for 2010.
5. In all RBS sponsorships, hospitality costs in 2009 have been reduced by around 90%.

With just a month to the start of the Season, it is unlikely that Williams will be the last team to receive bad news. Whether this starts a landslide in bank sponsorship remains to be seen - but it's always hardest to be the first to jump.