Recession or opportunity?

[Peter Mallett]

There’s a thread in Racers about valuing a racing car, but valuing and using are two different things.

We have at least one “banker” on the forum that will be in a better position than most to talk about this, and indeed we have some posters with a “stable” of cars to play with. Going by the old adage, “to make a small fortune from motor racing, start off with a big one”, it seems to me that with the current financial situation in the UK and almost certainly to hit Europe soon we may see a change in the type of historic racing that we currently enjoy. In this respect, whilst we accept that we “older buggers” have mostly got rid of the entanglements of our youth, there is still the need for consideration of what we drive and where we drive it/them.

So, if as that nice Mr. Darling says, we are indeed up that creek without the necessary propulsion assistance what can we expect to see change in Historic Motorsport over the next 12 months? Will we see a return of grids full of the smaller engined cars? Will those nasty V8s be mothballed or do their owners think they can weather the storm without worrying? (Millionaires are only millionaires because they are careful). Will this spell the end of the “festival” style of event with a return to the shorter format club event? With the US economy being ahead of us lot over here it may be interesting to hear if there has been any change on that side of the pond.

Thoughts please.

[simon drabble]

very interesting question and one that has been touched on several times over the last few months. In short Darling was understating the problem - it really is very bad indeed.
What effect will this have in racing? Well I can see it decimating modern club series where drivers rely on a bit of friendly sponsorship. It will have an effect on historics as well. I think the european jaunts will see less British entries than the last few years. I think the clubbie events like CSCC and HSCC will benefit at the expense of Masters, U2TC etc but overall entries will be down.
Germany has not enjoyed the same rate f growth in house prices as UK and to that end drivers have not been funding their racing in the same way so they might be less effected.
Look at some of the larger UK based collectors/racers and their fortunes are based on property development. You might find that they are more circumspect in their racing until the funding comes back on stream.
Parodoxically top end car prices go from strength to strength (as does UK property at the top end) so values might hold firm as they did in 92/3. Interesting times

[Peter Mallett]

Yes, I think this is where the smaller clubs will see an upturn in fortunes. Let's not forget the last time we were in this position was the early 90's when Coys was in its hey day but there was very little competition on the large scale festival front. And overseas jaunts were somewhat more difficult although Spa has been available since the eighties.

But then again what types of car will we see? CSCC doesn't run FIA categories, nor does MGCC or many others. They do have Championships for historic cars (the MGCC Thoroughbreds Championship for one) but they run to modifed rules rather than FIA although some do have an FIA category.

[simon drabble]

HSCC will probably benefit most from FIA type cars and Guards trophy being split into GT and sports racers seperate races might be the way forward. HSCC is already running to capacity and as a generalization most UK "Masters" entrant is an HSCC member. Dont get me wrong I am not saying Masters etc implode just they will lose the more "clubbie" entrants and it will become more of the "club" that Masters would like with each member possibly running cars in most catergories. This would be the ultimate business model for them as the spin off activities (entertaining etc) then becomes more cost effective. HSCC and I am sure CSCC run a different model where its more the merrier.
It will be interesting to see the effect on events like Silverstone Classic and Goodwood - lets hope its minimal

[Peter Mallett]

Another point to consider.

Is it bad enough for some to pull out entirely or will there be (as you suggest) a scaling back of activity rather than numbers?

[simon drabble]

events like Goodwood and the Classic are, like modern events, reliant on corporate sponsorship/entertaining to bolster the coffers.
In respect to individuals I am sure some will mothball or sell their toys - I think its highly unlikely that I will be doing european jaunts next year

[John Turner]

It seems pretty evident that the Tour Britannia has suffered from the recession. Entry numbers are down, this year.

[terence]

As a total contrast,I have had a rather sharp increase in the amount of enquiries this week.Perhaps people are looking at the work the government is supposed to doing to start a reversal of what we are expecting.What with oil dropping 27% and also the chance[slim]that interest rates will drop slightly,perhaps there has been too much hype from the media as usual.I think Darlings comments were perfectly timed to kick Brown into doing his job!
Opportunity? Yes,for the European's looking for more affordable cars,and also for those involved over on our little island.

[Peter Mallett]

Don't forget, oil is priced in dollars. Its real value is around $90 per barrel and has been for about five years. The strengthening dollar means that it costs about 20% more than it did when the dollar was at 1.98/£ so we won't see any reduction from there, only an increase because at today's price of $107 it is still high, just a smaller number. And the pound and the euro are both down against the dollar.

But your point about enquiries is where my reference to "opportunity" comes in.

[terence]

So far it looks quite promising!

[simon drabble]

maybe you would care to elaborate...

[john ruston]

Obviously all Pastimes will be hit by Credit Crunch and people will think twice about buying Euro's when it is so overpriced so less will do Overseas events.Good cars will sell and the run of the mill stuff will fall in value.
Grids will reduce and us Islanders will stay on the Island.Silverstone Festival should not be hit as it is not a corporate thing but Goodwood may be a different matter.May be they will charge entry fees

[midgetman]

Well, despite Simon's gloom I'm with Terence on this one. We've had our best summer ever, with more "quality" race suits sold that I could expect. I've noticed a reduction in bargain basement stuff.

"Corporate" sales (for conferences, corporate events etc) are stronger than before, to the point that I've hit the maximum of my suppliers' capacity. (Notice position of apostrophe - yes I do mean in the plural)

My take on it is that if people aren't moving house then they do not have to waste money on bigger mortgages, solicitors' fees, new carpets etc. Therefore they have some disposable income. The "recession" is being noticed because it is in high-profile industries like housing and money-broking.

Interestingly, high street retail sales are reporting rises, which kind of backs my observations. I know one kart centre that has seen phenomenal growth in corporate work because they are a bit cheaper than top line stuff like Palmersport.

So, let's not write off motor sport just yet. I think this is an opportunity :-) (at least I hope so having given up my "real" job....)

[simon drabble]

my wife has a womans clothes shop in Hampshire and she too is having a great summer and in fact is opening a second shop next month. However I do believe the crunch will takee some more time to filter through - banks balance cheets have been decimated and therefore cannot lend as they did and whilst that is only being seen at a corporate and interbank level at this stage it will filter down to the individual

[morninggents]

Interesting topic and as our thread opener might say .......... hmm.

There is no doubt we are in recession (however the government wish to term it) and my view is we will be in it until 2010 or later. The american economy is still in the doldrums and will remain there whilst they still have their jaunts in Iraq and Afghanistan - it will be interesting to see what happens there after the November election - and our economy tends to follow theirs. Brown is more leftwing than Blair and I'm sure the housemarket situation suits him fine - what does he care that his policies when chancellor encouraged folks to borrow big to purchase ever more expensive housing which now they find it hard to fund with increased borrowing rates.

The impact on historic racing will be seen next year as folks have already budgeted for this season and will no doubt see it out. Next year I expect race entries to be down and I too think it will be the Masters, U2L, that will suffer most where there is a large 'profit' element in the entry fee structure. I think we will see less of the racers who spend a shedload of bonus money on old cars and come and play for a couple of seasons or so before going off to do something else and to be quite honest I for one will not miss them, though the race preparation companies may do. Perhaps one good result is that classic car prices should come down.

As Simon has said the HSCC and CSCC will not suffer too much as they already present racing at the most economic level possible. However, even they may struggle if trackday activity is hit by the recession and the circuits increase hiring fees to compensate.

Overall not a happy scene for a year or two.

[john ruston]

It will bite from Sept entry form time such as Tour Auto,MM etc.and the effect will increase into next year.Look at recent retail figs.Euro is overvalued in terms of a basket of currencies.Problem is both GBP and the Euro are knackered so difference between two may not change.Car prices will reduce and those racing will decrease.Feel the preppers should see if these people making enquiries will eventually become invoices.As far as Masters is concerned I think the term is margin rather than profit(anyone want to buy a wigwam)

[Peter Mallett]

Originally Posted by john ruston

It will bite from Sept entry form time such as Tour Auto,MM etc.and the effect will increase into next year.

Yes, I tend to agree here.

Originally Posted by john ruston

Look at recent retail figs.Euro is overvalued in terms of a basket of currencies.Problem is both GBP and the Euro are knackered so difference between two may not change.

I suspect we're moving quite rapidly towards 1:1.

Originally Posted by john ruston

Car prices will reduce and those racing will decrease. Feel the preppers should see if these people making enquiries will eventually become invoices.

Agreed again.

Originally Posted by john ruston

As far as Masters is concerned I think the term is margin rather than profit (anyone want to buy a wigwam)

On a personal note I hope this doesn't happen, because having dragged my sorry rear end halfway around the globe to be on a track, I find this a good way of doing it. I can see its going to be too much for some but I hope they retain a core of their series.

FWIW the original Top Hat seems to be suffering more than others. Although the others have been running combined for a while.

But yes, this is definitely where the crunch will come.

and here's the first problem: http://www.telegraph.co.uk/money/mai...bcnhold104.xml

[john ruston]

Life improves if you have a US Dollar based contract!

[Peter Mallett]

[zefarelly]

Q: Recession or opportunity?

A: depends which end of the market your positioned!

If I had money I've seen some property bargains recently!


from the little guys perspective, all 'fast road' work has dried up, 'race/rally' hasn't, which is fine as its better business in every respect pretty much. but its all relevant and valuable as a fledgeling business.

the Dollar (until recently) has meant good value and margins on smaller items I'm importing for engines, the Euro has meant an influx of Euro shoppers.

[Al Weyman]

I hav'nt read the whole thread yet but I would like to ask Peter a question re those 'horrible V8's'.

How many miles to the gallon do you get from your Capri during a race and how much does it cost you to build an Essex engine from scratch? Reason I ask is because I get about 5 miles to the gallon which I would almost bet a weeks wages you don't get much more maybe 6 maybe 7 mpg but at the end of the day over a typical race day say I do 50 miles at 5 to the gallon thats 10 gallons of fuel say worst way £55 to £60. You would at most use a fivers less in fact I would say any average saloon would not use anymore than a tenner less, well I don't know about you guys but I am not short of the extra tenner. Then we come down to building the engine, can you buy a set of 6 Carillo type H-beam rods for £200? Well I can buy 8 for that, plus about the same for forged pistons plus a lot of other stuff substantially cheaper than on the Essex and I recon I can build a competitive engine for around 2k so at the end of the day I don't think the nasty V8's will be going anywhere.

[Peter Mallett]

Al,

If I worried about an incidental like fuel I wouldn't bother racing. I pay £3.00 per litre for what its worth and only think of usage on the basis of weight and distance. About 6mpg.

My quip re V8s was more related to the owners who generally have a stable of cars and have an entourage to handle it all. Don't be so sensitive or indeed off topic.

[Al Weyman]

I was not being either and certainly not off topic, we were talking amoungst other things high oil prices and you suggested or asked what would happen to the 'nasty V8's' so in that context I assume you mean because they use more fuel but as I see it the only difference between your car and mine in terms of running expenses is just really a tad more fuel both to drag its bulk to the circuit and to run it around but on other fronts even with the dollar against the pound it can be a lot cheaper, I just spoke with one of our guys who has had an Essex rebuilt by one of the countries formost guys and had no change from 4k!!!!

[simon drabble]

Originally Posted by Peter Mallett

On a personal note I hope this doesn't happen, because having dragged my sorry rear end halfway around the globe to be on a track, I find this a good way of doing it. I can see its going to be too much for some but I hope they retain a core of their series.

FWIW the original Top Hat seems to be suffering more than others. Although the others have been running combined for a while.

But yes, this is definitely where the crunch will come.

and here's the first problem: http://www.telegraph.co.uk/money/mai...bcnhold104.xml

Peter I hope it doesn't happen as well as I hate to see anyone fail but sadly when people count the pennies clubs which are not run for profit are always going to come out ahead

re interest rates of course the issue is not when BoE cut rates but how much the banks pass on - at present the answer is not much as good retail borrowers are offsetting the high interbank lending rates (look at LIBOR spreads). The interest curve is steep at the front end so rates will come down but probably not until year end earliest.

With many collectors buying without leverage I think apart from isolated instances "deals" will not be there, prices will come off but freefall collaps of the market is unlikey. Its more likely that cars will have almost binary value - ie they will be worth x or nothing. This could be where non FIA cars values disappear...

[simon drabble]

Originally Posted by Al Weyman

I just spoke with one of our guys who has had an Essex rebuilt by one of the countries formost guys and had no change from 4k!!!!

that sounds cracking value - I might get one for the Merlyn ;o)

Tidied the quote. PM