Don’t panic: the money’s rolling in now for 2012

Chris Blackhurst
16 Jan 2009

Paul Deighton is trying hard not to sound too pleased with himself. “On a relative basis we've gone from being an opportunity cost to being at the core of the pump-priming of the economy in terms of new jobs, skills and showcasing British creativity. In that respect, you could say we're the only show in town.”

It's just over three years since Deighton quit Goldman Sachs, where he was the investment bank's chief operating officer in London, to become chief executive of the 2012 Organising Committee. For much of that period, Deighton has been under intense ­pressure as questions have persisted about the finances of the Olympics.

He still is feeling the heat but there's no doubt the vibe around the financing of the Games has changed. The main corporate sponsors — Tier 1, as Deighton and his team refer to them — are in place and they're moving to secure the secondary or Tier 2 and Tier 3 backers.

To be fair to Deighton, Lord Coe and the others involved, they have never shifted from their belief that the Games will be a success. They have, though, had to put up with all manner of carping that they would fail or that their targets could not be met.

“As far as revenues are concerned, it comes in three chunks. There's the IOC money, which is a share of the broadcasting rights and the worldwide sponsors' revenues. Their top sponsors are all signed up for different periods. A couple did not renew after Beijing but that was expected and they are likely to be replaced. Then there's merchandising — that becomes more focused in 2011 and it's reasonable to assume the economy will be in a better place by then.”

This includes ticket sales and Deighton says it is too early to say how much they will cost or how much they will bring in. “There are 26 sports and we're working out business plans for each one.”

The third slice of income, after the IOC cash and sales of tickets and souvenirs, will come from domestic sponsors. So far, they have commitments of “well over £450 million and we're on our way to £500 million” against a target of £650 million. That progress has proved crucial.

As it is, one of the Tier 1 backers, ­telecoms equipment supplier Nortel, has sought Chapter 11 bankruptcy ­protection. “We're fully aware of the situation and working through it with Nortel,” said Deighton. “Chapter 11 doesn't mean they've gone bust. They're still operating — they're just protecting themselves from creditors.”

Under the deal, Nortel agreed to provide London 2012 with at least £40 million worth of routers, switches and other technology. Deighton is confident Nortel will stick to its side of the deal.

The Nortel-type arrangement, under which a sponsor provides products or services in kind rather than with straight money, is one of Deighton's successes. Of the Tier 1 sponsors, only Lloyds TSB is putting in the full amount in hard money. The rest — British Airways, BT, EDF Energy, Adidas, BP and Nortel — are supplying goods or expertise up to the value of at least £40 million (Tier 1 is £40 million-plus, Tier 2 £20 million and Tier 3 £10 million).

From the IOC, merchandising and sponsors, Deighton expects to raise the equivalent of £2 billion — the cost of staging the Games (not to be confused with the much touted £9.3 billion, much of which represents regeneration investment). He says: “If you'd said to anyone in 2005 what the economic environment would be in 2008/09 I don't think they would have expected us to be in the strong position we are in.”

How the main sponsors are lining up for the Games

Lloyds TSB
Banking and insurance
Value: £80m
Talented young athletes are being given a £1,000-a-year training allowance up to 2012 in a scheme run in partnership with Sportsaid. Under the “Local Heroes” scheme, teenagers have been scouted by top athletics coaches and the bank reckons 15 per cent of this talented group will become members of the Great Britain Olympic team. The bank is concentrating on the elite end but is in talks to fund grassroots coaching schemes with two sports. Under the deal, Scottish Widows is the official 2012 insurer.

BT
Telecommunications partner
Value: £80m
BT is focusing on elite sport. The company is backing the Dame Kelly Holmes Legacy Trust which, headed by the double Olympic champion, aims to nurture young talent. BT staff will also be assigned as mentors to British 2012 athletes, training them in business and communication. The company may choose to tie its Olympic sponsorship in with sailing, having already sponsored round-the-world yachtswomen Dame Ellen MacArthur

British Airways
Official airline
Value: £40m
The carrier provided thousands of flights for the Great Britain team to the Beijing Olympics and Paralympics last summer and will do so again for the Vancouver Winter Olympics in 2010. Soon to announce a bursary scheme for promising young athletes.

Nortel
Technology partner
Value: £50m
Business-to-business company providing technical expertise and equipment to the Games.

EDF Energy
Value: £80m
As a sustainability partner, EDF Energy is sponsoring alternative energies in the Olympic Park including a wind turbine to help power the Games site and a low-carbon Olympic cauldron.

adidas
Official sportswear supplier
Value: £70m
Fund for sport: £1million will go towards urban parks in each of the five Olympic boroughs. The first “adiZone” opened last summer in Tower Hamlets. adidas says these multi-sport outdoor gyms are built to last 20 years but the zones will stay after the Games only if councils approve.

BP
Official oil and gas supplier
Value: £50m-plus
BP is expected to help bankroll Olympic-themed exhibitions at venues it already sponsors such as Tate and Tate Modern, the Science Museum and the British Museum.

Cadbury
Official confectionery and ice cream supplier
Value: £20m

Deloitte
Tax, human resources and management consultancy services
Value: £20m

Adecco
Value: £20m-plus
Official Recruitment Services Supplier
Will recruit around 3,000 staff for Locog Adecco. It also works with the International Olympic Committee on the Athletes' Career Programme, which supports athletes' transition into work after competition. 

Boston Consulting
Value: Up to £10m
Strategic Consulting Provider
Role: advising on ticketing, merchandising, sponsorship and revenue strategies.