German car manufacturer Mercedes has revealed that the production of the V6 turbo engines used by its championship-winning Formula One team is contributing around £111.7m to the British economy.
Last month Lewis Hamilton steered Mercedes to a fourth consecutive F1 *title, and although it races under the German flag both the team and its *engine manufacturing division are based in Britain.
Mercedes designs, develops and builds its F1 engines at a dedicated factory in Northamptonshire. The local area is named “Motorsport Valley”, *after America’s Silicon Valley, as eight of the 10 F1 teams are based there. Mercedes’ engine division alone had total costs of £126.9m in the year ending December 31, 2016 according to its latest accounts. They state that “the company now employs 571 staff members and contributes over 88pc of its total expenditure within the United Kingdom”.
At £73.5m, research and development comprises the bulk of this with staff paid a further £42.6m. The economic impact stretches far beyond that as Mercedes’ engine division deals with nearly 1,500 UK-based suppliers *including designers, equipment manufacturers and haulage firms.
The engines do not just power Mercedes’ own outfit but also the Force India and Williams teams. Fees for leasing them are received by Mercedes, with parent Daimler providing the remainder of the engine division’s revenue, which reversed by 7.5pc to £140.4m last year. After paying an £11.4m tax bill it was left with a £1.5m net profit.
Revenue of the F1 team itself accelerated 35.7pc to £289.4m, fuelled by a boost in prize money from winning the F1 title the previous year. However, costs surged 10.7pc to £274.9m due largely to changes to the F1 regulations. After paying £15.9m in tax the team made a £3.8m net loss. Combined with the £1.5m net profit from the engine *division, Mercedes’ F1 group was left with a £2.3m loss after tax.
Its investment in Britain has been aided by the Government’s support of the hi-tech industry through its research and development relief, which gives companies a deduction on taxable profits of qualifying expenditure.
The accounts state that “the United Kingdom remains a global centre of competence for the motorsport industry and this, coupled with the Government’s support for research and development, has enabled the company to continue to invest in a highly skilled workforce and technologically advanced asset base”.
It is not entirely driven by racing. The accounts state that “the company engages in research and development to support the development of Formula One power units and the transfer of technology to road car projects”.