Subaru, an icon of the World Rally Championship (WRC) for almost two decades, has walked out of the sport to join the sudden exodus of Japanese companies from motor racing. The team who helped Richard Burns and Colin McRae, the British drivers, to win World Championships appear to have been panicked into withdrawing only hours after sending their entry for next year’s championship to the FIA, motor sport’s world governing body, for approval.

The effects of the credit crunch are reaching fever pitch in Japan and the lead taken by Honda, in putting its Formula One team on the market, and Suzuki, which withdrew from the WRC at the weekend a year after joining, is being followed throughout Japanese industry. Experts believe it is only a matter of time before Toyota succumbs to the pressure and pulls the plug on its Formula One programme. That would have drastic consequences for Formula One, with opinion growing that there is little chance of finding a buyer with deep enough pockets to fund the extravagant operation that Honda leaves behind in Brackley, Northamptonshire.

The departure of Subaru will also have huge consequences for world rallying, which was once one of the most popular sports in Britain. Tens of thousands flocked to the British rounds of the WRC in Cheltenham and Wales to see McRae, in 1995, and Burns, in 2001, win their titles.

The flamboyant style of the team, run by the Prodrive company based in Banbury, Oxfordshire, rubbed off on what was a prim and proper Japanese manufacturer. The blue-and-gold livery of the Subaru team cars became popular among sports fans over 20 years and sales of Subaru cars, particularly in Britain, jumped with each rally victory.

The only two full manufacturer-backed teams left in the WRC are Citroën and Ford and the latter is one of the companies that has been begging the US Government for a multibillion-dollar bailout. Ford has committed to next year, but doubts will persist in the wake of Subaru’s exit. All this comes at a time when rallying is struggling to maintain its appeal and television coverage of rallies has slipped from the terrestrial schedules to a digital channel, although spectators remain loyal.

David Richards, the chairman of Prodrive, was yesterday picking up the pieces of the £20 million-a-year contract that Subaru tore up without warning.

It is thought that events moved rapidly over the weekend after Suzuki announced it was abandoning the championship. By Saturday night, Subaru executives were in Britain to tell Richards they were finished with the sport, even though the company has a multi-year contract with Prodrive and had already posted the paperwork for the 2009 WRC season to the FIA.

“We had no warning,” Richards said last night. “But what can we do? This is the credit crunch again and it seems Subaru felt exposed after Honda left Formula One and could not justify having a world rally team. The pressure for car companies to cut all discretionary spending must be immense, but there is now a danger that companies are throwing the baby out with the bath water. Subaru have forgotten how their brand image was built.”

Prodrive plans to redeploy the 100 workers on the Subaru team to other projects, including the highly successful Aston Martin sports car-racing squad, which will be stepped up. The company will also continue to build rally cars for private customers, a lucrative export earner, and plans to press ahead with an alliance with a new company to build a new brand of world rally car from 2010.

Richards, meanwhile, has sought to distance himself from speculation that he will now concentrate his efforts on purchasing the Honda Formula One team.

Driving force

- Subaru was little known in Europe until the company took the courageous step to enter a World Rally Championship dominated by European teams, such as Lancia, Saab and Ford.

- Colin McRae, of Scotland, was the first of three Subaru world champions: Richard Burns, the Englishman, also won his championship at the final round in Britain, in 2001. Two years later, it was the turn of Petter Solberg, from Norway, to do the same

- Subaru's rally team are an all-British operation, the cars made by Prodrive, based in Oxfordshire.

- Prodrive has sold more than 500 Subaru rally cars to customers in 47 countries.

- Budgets are a fraction of Formula One. Citroën, the present champions with Sébastien Loeb, are thought to spend about £50million, Subaru less than £20million, compared with Honda's Formula One budget of close to £300million.

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