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2012 chiefs admit fears over £700m sponsorship
Matthew Beard, Evening Standard08.07.08
Olympics chiefs have admitted their target of raising £700 million in sponsorship will become increasingly difficult due to the global economic downturn.
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."
Reader views (10)
Well rather than whining, why don't these Olympics Chiefs simply disclose what "contingency plan provisions" were made in the successive 2012 Olympics budgets for this kind of disaster!
- Fraser, Telford Park
Maybe Ms Jowell should ask her 'estranged' husband to tap Berlusconi for a few quid to cover the shortfall.
- Doug Watt, london e14
I seem to think that the games are going to cost £15Bn. Remember Ken saying it would only cost you 38p? What he didn't say is that we'd be buying those ruddy Mars bars for the next 73 years.
- Jeremiah, London
Yeah! Cut back on their bonuses and expenses, cut back on free hotel rooms and chauffeured cars, cut back on free dinners, lunches, breakfasts, cut back on expensive leaflets, presentations, hordings, advertising. There is a lot that could be done, but not by the greedy self-righteous people currently in charge. It will be done by charging Londoners more taxes....
- Helen, norwich
It will transform London even more into a financial disaster! We simply cannot accommodate or pay for all these people with the current infrastructure. We already pay taxes on everything thanks to Ms. Powell and Nu Labor freaks. No games here - not welcome here in London! Go away Nu Labor. We simply cannot afford this after ten years of tax suffering and economic mis-management!
- Anthony, London NW1
Associating your company with this Government and their horrid ministers would be a PR disaster for any company.
- Bow Resident, London
If the government abandoned the unnecessary, unwanted and intrusive ID system, they would save £5 billion to £15 billion and could pay the whole £2.1 billion that Locog is trying to raise, and still have several £billion left for other expenses.
And we would have taken a few steps back from the police state which the government is moving us towards.
- Winston Smith, Derby, UK
If we all boycott the games it will probably finish the snought-in-troughs gravy train mess for good. And good riddance.
- Mikko Takala, Drumnadrochit, Scotland
I think Tessa Jowell looks scary, take a holiday dear, something's not right.
- Jacob, Canterbury England
If they cut back on their bonuses and expenses, they should be half way to the £700 mill, no problem.
- Londonken, London
