Credit crunch forces London’s Olympic bosses to recalculate

By Alice Ritchie, AFP

LONDON — 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 (US$12.4 billion) 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 center’s,” 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 center’s, 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 center’s, 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 reorganization will not affect the scheduled construction.