The firm employs about 4,000 people, and of the 1,200 to be made redundant, the vast majority will be in the UK.
While the coronavirus crisis has driven the redundancies across the whole group, the cost-cap has been the biggest influence on the racing team.
The company has worked hard to avoid these cuts and McLaren noted they have already "undertaken dramatic cost-saving measures across all areas of the business" and refocused McLaren Applied to prioritize "proven, high-growth revenue streams".
The Woking-based company has been working hard to financially secure its future amid the Covid-19 crisis by raising 300m from investors back in March and is set to raise a similar amount from a bond issue secured against its heritage auto collection and MTC base.
It said that demand has reduced for its technology solutions and sales and manufacture of its supercars have been affected.
According to reports, McLaren employs more than 4,000 now, so the cuts would cost more than a quarter of the workforce.
The group's executive chairman, Paul Walsh, said the cuts "will have a significant impact on the shape and size of our F1 team". McLaren has with the cars, technology and racing teams three important pillars in the organization, where many people will be fired in the short term.
As with all vehicle manufacturers, the impact of the coronavirus - which has interrupted production and driven down sales across the market - is now beginning to be felt keenly, with McLaren expected to be just the first of a number of brands to announce a downsizing effort to reduce costs.
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