London 2012 starts to feel the pinch
The British government may have to step in and guarantee bank loans for developers if enough funding is to be raised for the construction of major Olympic projects in 2012, such as the Olympic Village and the broadcast and media centres. The original plan was for such projects to be funded in the main by developers, but the banking collapse has made things immensely difficult.
Back in July, just before the Beijing Olympics and despite the gathering economic clouds, I was confidently told that the funding for the Village would be in place by August. Now it is clear that such plans are not ready and the developers will only be granted bank loans if they are underwritten by the government, making it the lender of last resort. It is worth knowing that the government has already pledged extra funding of its own, committing an additional £250m for the building of the Village.
The impact of the credit crunch on 2012 will figure much when the Olympic Board holds its first meeting since the Beijing Games in London on Thursday. The Board brings together all the stakeholders in the Olympic project - the government, the 2012 organising committee, the Olympic Delivery Authority, who are responsible for constructing the venues, the London Mayor and the British Olympic Association. However, with some key people missing for various reasons, no hard decisions are likely to be taken.
The agenda is said to be light but the meeting will provide a forum for discussion on cost cutting, perhaps by moving venues, as well as the Games' much advertised legacy. Consultants KPMG have been looking at three venues - shooting, equestrianism and basketball - to see if they could they be moved in order to cut costs. Could, for instance, the shooting competition move back to Bisley?
The original London bid did say shooting would be staged there. But, after coming a poor third to Paris and Madrid when the shortlist for 2012, London was advised by the International Olympic Committee that it stood a better chance if its bid was more compact, with more venues in and around the Olympic Park. While Bisley has its advocates, money would still need to be spent getting it ready. And the view is that such an initiative is unlikely to prove cost effective. The same goes for plans to relocate the equestrianism or basketball venues. In any case, such moves would have to be agreed by the IOC and the relevant international federations.
The question of legacy is, in many ways, the trickiest issue and greatly concerns London Mayor Boris Johnson. Legacy came up for discussion, albeit rather curiously, when Johnson, who has announced a 10-member legacy team that includes Olympic gold medallist Tessa Sanderson, met his Beijing counterpart during the Paralympics. I am told the Chinese started by asking Johnson what sort of contracts they might be able to bid for in London. Johnson told them many of the 2012 contracts had already gone but there might be scope in other projects, such as Crossrail or his proposed new airport plans. Talk then turned to the use of the broadcast and media centres after the Games, with the Chinese suggesting they might quite like to set up a university there. Further talks are expected when the Chinese visit London in November.
Use of venues after the Games is only one part of the London legacy. Just as important, if not more so, is the message London will send out, not only to this country but to the world, when it becomes the first city to host the Games for the third time. In 1908 and 1948, it could be said that Britain came to the rescue of the Olympic movement, as nobody else was then in a position to stage the Games. But in 2012, Britain has, as Lord Seb Coe put it, promised to teach the youth of the world what sport can do.
While the Paris video presentation to the IOC featured actress Catherine Deneuve, London opted for a narrative. It showed youths in bleak African townships forsaking their destructive behaviour in order to take up sport, inspired by watching the London Games on television. The message was clear: London 2012 would be global and have a 21st-century sporting message. London needs to articulate that message and articulate it quickly.
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I have always felt as though London would be the poor relation even before this crisis in the financial sector.
IT should be remembered is that the only times that London has been given the games is when the world was in turmoil after world wars and nobody else wanted them .
Although this meltdown could not be seen when the 2012 games were awarded I wonder if the IOC would be willing to accept a scaled down version after the spectacle put on by Bejing
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Anybody else get the feeling these Olympics are going to be slated by the public from all angles.
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London's bid was a disaster waiting to happen from day 1.
2.4 billion in cost was never going to be effective and nor is 9.4 billion.
The true cost will be over 15 billion even if costs are cut.
Giving the showjumping to Hickstead etc will cut costs and bring more revenue but it appears LOGOC have no idea on what works.
Sadly although London 2012 will go ahead and be okay it will look like a poor relation to Beijing and should have been awarded to another country.
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With regards to the legacy for shooting, the current propsed site at Woolwich barracks will be pulled down once the games are over.
For the benifit of abled and less abled shooters for the future bisley should be the obvious choice.
If Woolwich is used the shooting sports will be left with no legacy.
Unfair and not in the Olympic spirit.
Dave
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i am curious as to why DANINPBORO thinks the games should have been awarded to another country? why does he think another country would be in a better position to host the games?
and why are we hung up on this notion of outdoing beijing? was beijing even that great? surely the olympics are about the actual sporting events aren't they? surely the athletes make the games great!
and in terms of costcutting, beijing altered the design of the birds nest stadium after they won the games to save money because the price of steel went up. they abandoned the retractable roof. but we seem to forget this when we want to have a dig at our own country for trying to cut costs.
if you don't want the olympics in london don't watch it, and don't waste your time reading and writing about it. some of us want it and intend to enjoy it!!!
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Mihir,
With respect to the shoot venue. I am a member of the GB Shooting Team and the fact that a temporary facility at Woolwich is being constructed seems like an enormous waste of money to me (£18m as last count).
If I were betting man I would wager that an update to the facility at Bisley would be a more cost effective solution.
It would also provide a legacy for myself and other shooters in the UK, which a temporary facility would not.
I, as a UK tax payer would welcome this cost reduction, as I am sure everyone else would. Seems like a no-brainer to me!
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So, 2.4 billion was the cost when they made the bid, 9 billion is the latest figure the government have given us. I wonder what the final figure will be?
Is it too late to give the games to Paris?
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Why don't we just consider postponing the 2012 Olympics until 2016? Against the current economic and financial pressures which will take at least the next 3 or 4 years to stabilise, spending £9-12bn on a 'non-essential showcase event' such as this will seem increasingly imprudent. Homes, welfare and maintaining long term employment should be UK plc's priority. Many countries may be feeling relieved they don't have this financial burden looming. So let's do a sensible review of the costs/benefits - otherwise the Olympics may end up being seen in a similar light to the Eurovision Song Contest - each country hoping they won't end up hosting it when the music stops (no pun intended) because of the cost and embarrassment.
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It will be an absolute fiasco one way or the other [financial-weather-organisation etc etc].
Why not just ask the Chinese to take over now?
Save a lot or red faces all round!
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Well I for one am glad that the Olympics are coming to London.
How much more do you think the Government would be spending on the unemployment within the construction industry if the Olympics were not being staged ( and before it is said, as well as migrant labour there are a lot of Brits working on the 2012 development)? and have the people who complain ever been to Stratford to see just how much the area needed the regeneration?
Other countries would be proud to see their country hold the centre stage, we on the other hand have to find as many ways as possible to put ourselves down.
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I confidentally predict that the final cost of hosting the 2012 games will surpass 17.5 billion pounds.
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Re LordSUPERFRED:
"IT should be remembered is that the only times that London has been given the games is when the world was in turmoil after world wars and nobody else wanted them ."
Exactly what World War was taking place in 1908 then? I'm not the greatest of historians but I'm pretty certain that WW1 took place a good few years after the first London Olympics was staged.
As for the suggestion that another country should have staged the 2012 Games - why, eaxctly? Britian will still host a decent event, despite the financial meltdown, and it's not going to bankrupt the economy.
If we can find billions to spend on sending troops across the world, I'm sure the powers that be can find some extra cash to help out a sporting occasion that will put us back on the global map.
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#10:
"How much more do you think the Government would be spending on the unemployment within the construction industry if the Olympics were not being staged?"
Don't know, but I'm pretty sure it would be a lot less than 9 billion (and counting!) extra.
And anyway, what if they spent the money building some new hospitals instead? That would also keep builders off the streets, and do something useful as well.
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#13
New hospitals to house all the unfit Brits?
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I'm still not convinced that having the olympics here will convince many people to take up sport. Maybe there'll be a temporary increase, but I don't see a lasting change in the sedentary lifestyle of most people.
I'm interested to see who can run fastest, throw furthest, jump over stuff quickest, row in a straight line in the shortest time, etc etc. I do find it strangely inspirational, but I'm already participating in sport (albeit at a very amateur level).
I think the real question at the heart of all of this is, given the current climate, should this really be a priority, or could the money be better spent elsewhere? It's not a question I know the answer to, and it could equally be levelled at just about any other project, but we shouldn't be afraid to ask it. Even if the answer could be that the money should be diverted elsewhere.
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I just wanted to answer a few questions posed elsewhere.
To post 7:
Yes, it's too late to give the Games to Paris. Three and a quarter years too late.
To post 8:
Postponing it is a great idea. I bet the athletes would back that idea. And the organisers. And the sponsors. Maybe we should stop playing Premier League football until the bankers stop messing around with people's money and billionaire self-promoters stop buying the clubs.
To post 9:
Would giving China the Games now really be the best answer? I don't know about you, but I might find that a bit more embarrassing than hosting the Games.
To post 11:
I hope your sources are as good as Mihir's.
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#14:
I take it from your comment that you've swallowed the line from the Olympics industry that having the Olympic games magically encourages everyone to suddenly start leading healthy lifestyles?
Is there any evidence whatsoever that that is true? You might want to read Hogan and Norton, J Sci Med Sport. 2000 Jun;3(2):203-18. They didn't find any.
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#17
To be fair there was a bit of sarcasm in my response! But is it really only hospitals our country needs? I would hope that the fairness/worthiness of a country is not measured solely on the number of hospitals that it can build.
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#18:
Sorry, missed the sarcasm. My apologies.
I'm sure the country needs plenty of things other than hospitals. My point is that we do need hospitals (either to increase capacity where it is lacking or to replace outdated buildings in existing ones), and they would be a far better use of 9 billion quid of my money than some white elephant that only gets used for a couple of weeks.
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As usual the headlines don't reflect the reality on the cost of the games, the original figure of £2.4b was never set to be the final cost, only the media made that assumption.
As with any large scale infrastructure programme,there was a lot of detailed planning and costing to be finalised once the decision to award the games to London had been made. However that story doesn't make as good a headline as olympics costs rise from £2.4b to £9.4b.
This is standard practice when planning and costing a programme that will run over multiple years you can't plan the detail of 2011 until much closer to the time.
If we can get greedy Gordon to make the games construction VAT exempt that would free up £1.4b of the £9.4b to go into the facilities and give more flexibility to at least attempt to come in on cost.
I still think it will over-run in cost unless some bold decisions are made on moving venues to use existing facilities, what is the worst the IOC will do? they won't take the games away from London.
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Around here (Peterborough) the lasting legacy of the games appears to be a rowing lake that will prevent the railway line between Sandy and Bedford being re-opened. This would stop the re-instatement of a direct rail service between Oxford and Cambridge and the possibility of another way in to London by train will be lost. Hardly progress
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I'm glad we're hosting the Olympics.
I would love to see sprinting events in the rain.
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Athens 2004 and Beijing 2008 had 2 simple factors London does not - the country were desperate to host the games.
With the choice of lower taxes or fuel bills or hosting 2 weeks of sports and a few new stadiums most people would choose the former.
Athens and Beijing wanted the Olympics as national pride and a chance to put on a show, most UK people could not care less.
London will put on a good show but people do not support to the same degree.
With the upcoming credit problems London faces much higher costs for finance and rising costs of materials as well as having vastly under budgeted other areas. This can only lead to problems and misery longer term for the country having to pay for it.
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#20:
No, it wasn't just the media, that was the official government line at the time. This is what they had to say:
"The probability based risk assessment we have undertaken on Games’ costs and revenues provides further reassurance that £2.375 billion represents an acceptable level of provision for potential contingencies. Any residual risk that this level would be exceeded can be reduced through strong management intervention during both the bidding and staging periods."
See http://www.culture.gov.uk/images/publications/OlympicsCm5867.pdf
The VAT argument is totally irrelevant anyway, given that it's being paid for out of public money. If they pay 1 billion of VAT, the project costs 1 billion more, but the government has an extra 1 billion with which to pay for it. It doesn't actually matter a jot whether it's liable for VAT or not.
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#7
"Is it too late to give the games to Paris?"
Thanks.
But no thanks!
You wanted those games.
You keep them......
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I had a feeling that the British Government was going to have to step in at some point, and "bond" the cost of the olympics in 2012....
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#25:
No, you are completely wrong! I didn't want the games. No-one has ever actually asked Londoners in general if we wanted the games, but I'm pretty sure if you'd put it to a popular vote the answer would have been a resounding no. Almost every Londoner I've spoken to never wanted the games here.
The trouble is, given that all 3 of the major political parties were in favour of bidding for the games, there was no realistic way of us ordinary Londoners stopping the politicians going ahead with their crazy scheme.
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The athletes will be successful...if the event is actually built on time ofcourse!
People will still be paying for it though long after the Olympics end.
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It is the same for the swimming. The huge Aquatics centre has already priced itself out of the market for so many local clubs and other watersport users.
Water Polo (the first scheduled Olympic event in 2012) will take place in a temporary "tank", which like the shooting venue, will be dismantled after the celebrations.
The 'Legacy' - GB Water Polo will have poured millions of pounds into developing some supremely talented athletes (currently training morning/noon and night in Manchester) yet 2016 will see the UK out of the top sixteen nations again because the funding will cease.
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#27
Well, you probably voted for at least one of them in a general election
Monster Raving Loony Party is the way to go...
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'No, you are completely wrong! I didn't want the games. No-one has ever actually asked Londoners in general if we wanted the games, but I'm pretty sure if you'd put it to a popular vote the answer would have been a resounding no. Almost every Londoner I've spoken to never wanted the games here.'
I'm a Londoner and I want the games here. I also know that almost every Londoner I have spoken to wants the games here. So ner!
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I think when it's 2012, people will be much more positive about it. (Hopefully)
It was the same when we were bidding for it. Everyone was saying whats the point and we will never win, yet, practically everyone was happy about it when we beat Paris.
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#31: Just out of interest, how many of the Londoners you speak to are council tax payers?
Of course we could debate endlessly about whether Londoners want the games, but the fact is we'll never know, because we weren't asked.
We mostly voted for political parties that supported the bid, but given that Labour, Tory, LibDem, and Greens all supported the bid, what choice did we have realistically?
#32: Plenty of people weren't happy about it when we beat Paris. You just think everyone was happy because the small minority who were dancing in the streets to celebrate received disproportionate media coverage. The media simply ignored the millions of Londoners who never wanted the games.
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#31: Just out of interest, how many of the Londoners you speak to are council tax payers?
Why, how many did you ask that were tax payers? I'm guessing most people I asked were as I only tend to speak to tourists when they want directions.
'The media simply ignored the millions of Londoners who never wanted the games' - your the one who said we will never no how many Londoners want the games because we were never asked so how can you assume millions did not want the games! On that basis, I therefore assume the media then simply ignored the millions that did want the games and let moaners like you hog the spotlight complaining about them.
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And how can you assume that there are not millions who don't want the games?
The fact is we simply don't know, because no-one has ever asked.
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