Approximately 30 Volkwagen Motorsport employees were set to travel from Germany for the three-day event in the south of England, but rapidly rising numbers of COVID-19 cases across the UK and Europe forced the company's hand.
"We deeply regret not being able to attend Goodwood this year, but the health of our employees is of paramount importance," said Sven Smeets, Volkswagen Motorsport director. "After lengthy internal discussions, we are convinced that this is the right decision in the current situation.
"We would obviously have loved to compete against the opposition at Goodwood Motor Circuit, but this is unfortunately not possible for us at the moment.
"It is not appropriate to bring such a large team from Germany to the UK at a time when measures to prevent the spread of coronavirus are being ramped up significantly in all European countries.
"Even though we are unable to attend, we wish the organisers and the many SpeedWeek participants a successful event and really hope that we can compete in Goodwood again in 2021 under different circumstances. This weekend we will all be watching the live broadcast at home instead!"
The 670 bhp ID R was set to take part in the shootout competition around the Goodwood Motor Circuit, looking to add to the two Festival of Speed shootout wins that the car achieved with Romain Dumas at the wheel in 2018 and '19.
Volkswagen's first production electric offering, the ID.3, was also scheduled to appear alongside the prototype record-breaker.