Formula One experienced a seismic shock last night when it emerged that Honda, the Japanese car giant, is pulling out of the sport because of the collapse in car sales that is forcing it to suspend manufacturing at several of its plants around the world.

In a move that has stunned Formula One, the Japanese multinational is believed to be planning to suspend its racing operations in Japan and at the team headquarters at Brackley, near Silverstone in Northamptonshire, and the team is up for sale. The decision leaves the team’s drivers, Jenson Button and Rubens Barrichello, without seats for next season unless a buyer can be found.

It is understood that Ross Brawn, the team principal, addressed a meeting of the workforce at Brackley yesterday evening and told them that the company was ending its involvement and that everyone would get three months’ pay.

Brawn is understood to have said that he was hopeful that a buyer could be found for the team. He is thought to have suggested that there is a buyer in the offing but that, if a deal went through, the annual operating budget would fall from the present £150 million to £50 million, meaning that many staff would still lose their jobs.

The decision to withdraw by Honda, which is expected to be confirmed officially by the company in Tokyo this morning, comes after months of warnings by Max Mosley, the president of the FIA, that Formula One is in danger of going out of business if it fails to cut costs as the world economy shrinks. However, even the most pessimistic of paddock-watchers were not expecting one of the five leading manufacturers on the grid — the others being BMW, Renault, Toyota and Mercedes-Benz — to pull the plug without warning.

Last night there were fears that Honda’s move may prompt others to follow suit and leave Formula One, which even before this latest withdrawal was down to 20 cars, unviable. As a well-placed observer put it: “Now that Honda has taken the plunge, I wouldn’t bet against someone else doing the same. All the big manufacturers are coming from the same place — huge losses in America, which, of course, has been the source of massive profits in the last ten years.”

Toyota, the largest Japanese car manufacturer, could be the most vulnerable. Like its old rival, it has spent hundreds of millions of pounds per season in Formula One with very little success and, like Honda, it is has seen its worldwide car sales slump alarmingly, forcing it to suspend production at several factories, as Honda is doing at its plant in Swindon and at two plants in the United States. If Formula One suddenly looks a profligate irrelevance in times of trouble for Honda, who is to say that it will not look the same from the boardroom of Toyota? If the grid for 2009 drops to 16 cars, the sport will be in a serious mess.

The sudden nature of developments at Honda shocked other team principals, who were informed at a meeting of the Formula One Teams Association in London yesterday. Unsurprisingly, perhaps, in a statement afterwards which did not mention Honda, the teams committed with renewed vigour to urgent cost-cutting measures for next season, when mid-season testing may be banned. They also said they had “unanimously agreed” that a “new low-cost engine will be introduced” into Formula One in 2011.

On the sporting front, Honda’s withdrawal comes after one of its worst seasons. It finished second last in the manufacturers’ championship with Button third from bottom in the drivers’ rankings, with three points, and Barrichello in fourteenth place with 11 points. However, the team were well into a rebuilding phase under Brawn and had hired scores of new technical staff as it tried to get its fortunes back on track next season, when a raft of new technical regulations gave it a chance to make a leap up the rankings.

For Button, the loss of Honda is yet another blow to a career that seems to be permanently on hold. The British driver has been completely eclipsed by Lewis Hamilton, his compatriot, as he has waited for Honda to provide him with machinery capable of winning races. With a salary of £20 million, with all the race seats taken at other teams and with little to show for his efforts apart from one race win in Hungary in 2006, Button could be facing a year on the sidelines.