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Credit crunch squeezes private funding for 2012 London games

Latest update : 2008-10-09

London's Olympic planners were counting on private money for urban projects in advance of the 2012 Olympics games. But with the credit squeeze affecting private investment, they are having to rework their budgets.

London's Olympic chiefs are having to rework their budgets as the global credit crunch squeezes private funding for the 2012 Games -- although Team GB's success in Beijing has helped boost the coffers.
The British government expects about seven billion pounds (12.4 billion dollars, 8.9 billion euros) of private sector money to go into the Olympics and the regeneration of the area around Stratford, east of the British capital.
But fears are growing that, as banks worldwide stop lending, developers are struggling to come up with the cash, and taxpayers will have to step in.
The one-billion-pound Olympic Village, which will provide accommodation for 17,000 athletes, is proving the biggest headache as Australia's Lend Lease, the preferred developer for the project, reportedly struggles to find the money.
A government study published in July warned the deal with Lend Lease -- which had hoped to recoup some of its investment by selling on some of the accommodation after the Games -- was "significantly affected by the downturn in the financial and property markets since the turn of the year".
"Fundamentally, we originally expected to have quite big sums of private sector funding for the Olympic Village and for the media centre," said John Armitt, chairman of the Olympic Delivery Authority (ODA).
"The consequence of what is happening in the markets means that the availability of funding is more difficult -- that is not to say that it is not available but, if it is available, it is available on harsh terms."
The ODA, which is responsible for the infrastructure of the London 2012 Games, planned to put in 500 million pounds for the Olympic Village and media centre, with the private sector picking up the rest.
But this balance will likely change, with extra public funds provided from a two-billion-pound contingency fund.
Discussions were "going on with banks", Lend Lease and the preferred developers for the media centre, Armitt said, adding that the solution was likely to see "an element of contingency funding required".
But he stressed that the total 9.3-billion-pound budget for the Games -- the majority of it being paid for by taxpayers -- will not increase.
Work has already started on the Olympic Village, and the government insists that any budgetary reorganisation will not affect the scheduled construction.
Meanwhile LOCOG, the committee responsible for actually putting on the Games, is confident of sticking to its two-billion-pound budget, noting Britain's haul of 47 medals including 19 golds in Beijing has helped.
"In terms of staging the Games, at the moment there's been no impact (from the credit crunch)," a spokesman told AFP. About half of the money expected to get through sponsorship -- a third of LOCOG's total budget -- has been secured.
"We all recognise the economic environment is difficult but so far, following the success of Team GB and the Paralympic Team GB, we have had quite a lot of interest since Beijing for joining the commercial programme," he said.
Other projects also appear on course. Westfield, the developers building the 1.45-billion-pound retail complex at Stratford that is due to act as the "gateway" to the Games, said it was "completely confident" of its funding.
The head of the International Olympic Committee, Jacques Rogge, is also optimistic, telling reporters last month: "The (London) Olympic construction authority is looking for more funding but the latest report we had is that they would manage in finding the proper funding."

Date created : 2008-10-08