The teams association FOTA said BMW-Sauber, Brawn, Ferrari, McLaren, Red Bull, Renault, Toro Rosso and Toyota were united in a decision that would split the sport in two if carried through.

"The teams cannot continue to compromise on the fundamental values of the sport and have declined to alter their original conditional entries to the 2010 world championship," said a statement.

"These teams therefore have no alternative other than to commence the preparation for a new championship which reflects the values of its participants and partners."

The governing International Automobile Federation (FIA) had set a Friday deadline for teams to make their entries unconditional or risk exclusion in favour of would-be new competitors.

The eight FOTA teams had submitted entries conditional on the 2010 rules, which include a controversial budget cap, being rewritten and the signing of a new commercial agreement governing the sport.

Attempts by both sides to reach a compromise failed, with the FIA accusing teams earlier in the week of wanting to take over the sport.

LOWER PRICES  

FOTA said their new series would encourage more entrants, listen to the wishes of fans and have transparent governance.

The teams, who are due to race in the British Grand Prix on Sunday, also promised "lower prices for spectators worldwide, partners and other important stakeholders.

"The major drivers, stars, brands, sponsors, promoters and companies historically associated with the highest level of motorsport will all feature in this new series," it added.

There was no immediate comment from the FIA or Formula One’s commercial supremo Bernie Ecclestone.

Former champions Williams and Force India have already committed unconditionally to the FIA’s world championship along with three new entrants — Campos, U.S. F1 and Manor — who have yet to build any grand prix cars.

The FIA has put another group of applicants on hold pending the outcome of talks with existing teams although one would-be new entrant, chassis maker Lola, has already withdrawn its application.

It remains to be seen whether the new entrants, who have all agreed to race with a 40 million pounds budget cap, will still be willing to commit to a series without glamour teams such as Ferrari and McLaren.

The stage is also set for a legal battle, with the FIA saying champions Ferrari and the two Red Bull teams have contracts that commit them to the existing championship.

Sponsorship and broadcast deals will also come under scrutiny with television networks facing the loss of the big name teams and drivers that bring in the viewers. 

The eight FOTA members met at Renault’s Enstone headquarters on Thursday evening after receiving letters from FIA President Max Mosley urging them to drop their conditions and sign up.

Their statement accused the FIA and Ecclestone, who represents commercial rights holder CVC, of trying to divide them.

"The wishes of the majority of the teams are ignored," the statement said. "Furthermore, tens of millions of dollars have been withheld from many teams by the commercial rights holder, going back as far as 2006.

"Despite this, and the uncompromising environment, FOTA has genuinely sought compromise."

FOTA will have plenty of options when it comes to drawing up a calendar, with Formula One having discarded several European and American venues in recent years in favour of lavish new facilities in the Middle East and Asia.

Silverstone, which hosted the first championship race in 1950, will join that list after Sunday.

Meanwhile Formula One’s governing body insists it will not be held to ransom by the eight teams threatening to form a breakaway series in a row over the submission of unconditional entries for next season’s championship.

The International Automobile Federation (FIA) added that it would publish a revised list of entrants to its championship on Saturday.

"The FIA is disappointed but not surprised by FOTA’s inability to reach a compromise in the best interests of the sport," it said, referring to the Ferrari-led Formula One Teams Association’s plan to set up their own series.

"It is clear that elements within FOTA have sought this outcome throughout the prolonged period of negotiation and have not engaged in the discussions in good faith," added a statement.

"The FIA cannot permit a financial arms race in the Championship nor can (it) allow FOTA to dictate the rules of Formula One.

It said the deadline for unconditional entries to its championship would expire as planned later on Friday.

The FIA had set a Friday deadline for the remaining teams to make their entries unconditional or risk exclusion in favour of would-be new competitors.

The eight FOTA teams had submitted entries conditional on the 2010 rules, which include a controversial budget cap, being rewritten and the signing of a new commercial agreement.