2012 chiefs admit fears over £700m sponsorship

The gloomy forecast by the Games organising committee, Locog, is revealed in financial accounts seen by the Evening Standard. Locog says: "The current turmoil in the world economy is creating a tough selling environment across all categories."

It has set a target of raising £ 700million from sponsorship towards the £2.1billion it will spend on staging the Games. Last week it passed the halfway mark when it signed up BP as the official oil and gas supplier, in a deal worth £50million. The oil firm became the sixth tier-one partner after Lloyds TSB, EDF Energy, adidas, British Airways and British Telecom signed similar deals.

Locog sources say they are relieved to have finalised so many deals before the credit crunch, and concede that in the current climate they would not have been able to charge £80million to Lloyds TSB to become official banker, with a loan facility of £70million as part of the deal.

Sponsors in the automotive and clothing/homeware sectors will not be signed up until after the Beijing Games.

Negotiators will now concentrate on finding up to 30 tier-two and tier-three backers, willing to pay at least £ 20million, either in cash or the equivalent in goods and services. Locog may clinch deals in these lower categories with German logistics firm Schenker and security firm G4S.

It is also launching a range of merchandise to coincide with the handover of the Games to London. T-shirts, rucksacks and baseball caps bearing the 2012 logo and made by adidas will go on sale on the "handover day" of 24 August. A commemorative coin will also be minted.

Difficulties raising Olympics-related sponsorship in a downbeat market were brought into focus recently, when it emerged there has been little private-sector interest in a Government plan to raise £100million for Team GB at 2012.

Locog is raising all its £2.1billion from the private sector. Other revenue streams it is counting on include £375million in broadcast payments from the International Olympic Committee;

£376million from ticket sales; and £183million from global sponsors such as Coca

Cola and McDonald's. Locog's spending will include £495million on fitting out venues, £298 million on wages, £242 million on technology and

£126million on transport. A spokeswoman said: "We acknowledge it is a different economic environment but we have not seen any downturn in interest. Our decision to go to the market early has been vindicated, particularly in the case of the bank deal."

Locog's funding is separate from the £9.3billion Olympics budget earmarked largely for construction and security.

In an article for the Standard today, Olympics minister Tessa Jowell warned: "Let no one be in any doubt: there is no more money for 2012. So if costs unavoidably go up ... we will cut our cloth accordingly or make savings elsewhere to stay within the £9.3 billion budget."