Tonight:
4°c
Olympic village runs out of cash
Matthew Beard, Evening Standard20 Jun 2008
The 2012 Olympics were plunged into a major cash crisis today as the firm building the athletes' village admitted it could not raise the money.
Australian construction company Lend Lease said the credit crunch meant it could not find its £450 million share.
Itmeans that at least £200 million of public money is being poured in immediately to carry out work on the Stratford site. If the credit crunch continues the taxpayer could be landed with the entire £1 billion bill for the village. The Olympic Delivery Authority will almost certainly have to raid its £2.7 billion contingency fund.
The village will house 17,000 athletes and officials during the Olympics before being converted to 3,500 homes for rent or sale after the Games.
Lend Lease's dramatic statement to the Australian stock exchange came after ODA chairman John Armitt admitted a public bailout was under way. "The Government at the end of the day will have to come in and support the village - that is understood," he said. Highlighting the credit crunch, Lend Lease said in its statement: "Given current market conditions, it has taken longer than envisaged to secure project debt."
It said the company believed it could raise the money by the end of the year - meaning public funds will need to be committed for at least seven months to keep building work going.
Crisis talks are continuing between the Australian firm and ODA chief executive David Higgins - formerly chief executive of Lend Lease - over funding.
The original plan was that Lend Lease would make a profit by selling the athletes' village buildings after 2012.
But banks and other lenders who were to come up with the cash are now reluctant to do so because they fear falling property prices mean they will not get all their money bank.
Meanwhile, the cost of borrowing has risen sharply.
The stock exchange statement - an unusual move - came hours after a report by the National Audit Office said that the public-private partnership deal for the village had unravelled, and the Government was working on a rescue package.
Mr Armitt told the BBC yesterday: "Funding is proving difficult in the current financial markets. What drives lending for something like that is the end value, and people find it very difficult to put an end value on the in 2012.
"The Government will have to come in and support the village - and that's understood. Negotiations are going on at the moment to try to minimise the degree to which further government funding is required."
This week the Evening Standard revealed a financial package for the village was a year behind schedule - prompting the International Olympic Committee to put Games chiefs on "amber alert". Foundation work on the village, which forms part of the planned Stratford City retail complex, has started on schedule and is due for completion in early 2012.
Mayor Boris Johnson's Olympic adviser, David Ross, this week pinpointed the village as a major concern and said the current funding plan was unrealistic. Mr Johnson is proposing to bail out the project by diverting to the village government funds that have been made available to him for housing.
Reader views (12)
Well there a surprise - the original budget was not worth the paper it was written on, and Ken Livingstone et all knew it. They should be held personally accountable in some form for knowingly putting forward a bankrupt project.
- Jeremy E, London, 23/06/2008 12:37
Report abuse
Why are we spending, in these troubled financial times, £9 billion to finance a three week jamboree for pampered and over privileged athletes who will give nothing back to the UK and will quickly return to their warm weather "training" sites as soon as the Games are over?
If we win a 100 Gold medals will that buy our businessmen more credibility in international markets?
If we want to renovate a run-down area of east London we can do it for considerably less than £9 billion.
It's not too late to hand over the Games to Paris. Most of the UK will watch the Games on TV, so the location is irrelevant. At least, we could indulge ourselves in a bit of schenfreude at the expense of our Gallic neighbours.
- Tom Williams, Oxford UK, 23/06/2008 08:53
Report abuse
I think that London 2012 is a great idea. I'm sure that the Government will find the cash that is much needed for the Athletes' Village.
- Andrew, London, UK, 20/06/2008 14:10
Report abuse
Just another fiasco aka Wembley, Millennium Dome and all the other doomed projects so glibly funded by the poor old UK taxpayers bottomless pit of money! Dump the whole thing now - it is a pointless PR money pit!
- Gary, Wycombe, 20/06/2008 14:04
Report abuse
How surprising.
- Squiz, Islington, 20/06/2008 13:47
Report abuse
Never mind, give them a chance to see how the other half live and put up in un-refurbished council slums.
- John Frum, Bracknell, 20/06/2008 13:32
Report abuse
Did you expect a newt loving socialist to deliver? After his performance at the GLC, the voters of London deserve what they voted for the second go around. Take Red Ken's retirement benefits to help pay off the Olympic deficit.
- Paul, London, 20/06/2008 13:20
Report abuse
As far as the Olympics go, each athlete needs accommodation so the residents of Stratford, Forest Gate,Bow, Leyton could all adopt an athlete for a couple of weeks and give them bed and breakfast. Alternatively we could put athletes in tents like a scout and guides jamboree or one big tent (Millennium Dome). Or let athletes sleep in the stadiums and spend the day watching other athletics from the stands. If the athletes can't be bothered watching why should we? Or make athletes fly in to T5 on morning of their event, catch tube and fly back home in evening Probably as carbon friendly as building village. What is the village going to be called? Over Lea Spent.
- Nick, London, 20/06/2008 12:59
Report abuse
Unless Boris had routed that pariah Livingstone and immediately set up an interim 'audit', what's the betting that the NAO would never have been flushed-out on this scandalously mismanaged overspend for another four years, thereby conveniently avoiding exposing McLabour to this shockingly embarrassing mess until after 'their wonderfully successful' Labour Olympic Festival.
Once again, good old Boz.
- Dave, Cumbria, 20/06/2008 12:43
Report abuse
In glorious Technicolour, the train wreck to end all train wrecks is steadily unfolding before our eyes.
Is it not too late to hand the whole ghastly mess over to the French?
- David W, London, 20/06/2008 12:38
Report abuse
What a disgrace! Scrap the whole thing now!
- S. Khan, London, UK, 20/06/2008 12:36
Report abuse
Why oh why can't we just cancel this obscene project?
- Mikko Takala, Drumnadrochit, Scotland, 20/06/2008 12:21
Report abuse
