More Contingency Funds Released for 2012 Olympics Build

Tessa Jowell insists that the 2012 Olympics will be within budget despite today's $631 million contingency funding. (Getty Images)As the economic crisis hits London 2012's preparations, Britain's Olympic Minister Tessa Jowell releases a further $631 million of contingency funding to plug the shortfall in private finance needed to continue work on two major Olympic projects.

The contingency funding allocated Wednesday to support the building of the Olympic village was $447 million; an additional $184 million aims to keep development of the International Broadcast and Main Press Centers on track.

The Olympic Delivery Authority, the body responsible for Games venues and infrastructure, requested the emergency funds after the developers of the village and media centers failed to raise private investment contributions for the projects amid the deepening financial crisis.

In a statement, Jowell said the Olympic village and media centers were “absolutely essential” to a successful London Games with a real lasting legacy.

“With private sector funding now much more difficult to secure because of the global economic downturn, it is right that we take steps to safeguard these projects,” she said.

“Lower than anticipated construction inflation and good progress across the project has reduced risks, meaning that the overall [$13 billion] budget is unchanged and enough contingency funds remain,” Jowell said, restating her determination to deliver the Games within budget.

Jowell insisted that the increased use of taxpayers' investment in these projects meant the public purse “will receive a greater share of receipts when they are sold after the Games.”

A total of $540.7 million was released today from the Olympic Funders Group contingency, the part of the budget designed to guard against risks outside the control of the ODA. Separately, $92 million was released from the ODA’s program contingency.

The Department for Culture, Media and Sport confirmed in a statement that the extra funding for the Olympic village included the $131 million of contingency released last year and would allow works to continue on the scheme – the biggest and most expensive of the Olympic construction.

The ODA is still holding out hopes that its negotiations with developer Lend Lease and the banks can deliver some private investment for the project. But in the current climate the Australian company is not expected to make good on its commitment to raise half the finance for the $1.2 billion project.

The government said today that negotiations were continuing with Registered Social Landlords (RSLs) in relation to the provision of affordable housing, which also contributes to funding of the project.

But it seems certain that another chunk of the total $3.7 billion contingency funding will be needed for the Olympic village during the next year-and-a-half of construction as costs mount up.

Earlier this month, London 2012 said building work was on schedule, despite the ongoing financing problems. The foundations of several buildings are complete and structural work is under way on the ground-floor level of the first residential buildings. Work began in May last year and it's become one of the busiest construction sites in London with more than 570 workers on site.

The 17,000 athletes and officials at London 2012 will be accommodated in 2,800 apartments. Post-2012, about one third of the apartments will be sold off as affordable housing.

The government confirmed today that the IBC/MPC will now be funded entirely from its overall Olympic budget.

Following cost reductions, the total public funding for the project will be $488 million. The injection of contingency finance Wednesday is on top of the $302 million of public sector funding. The public sector will retain ownership of the asset and receipt of all revenues from its sale after 2012.

There has been speculation that 2012 organizers would develop the press center within the Westfield-owned Stratford City shopping mall outside the Olympic Park with a temporary venue accommodating the broadcasters.

In its statement, the government said the IBC/MPC were still planned to be built as permanent structures with some temporary elements for the Games. “They will be based at Hackney in the north-west corner of the Olympic Park as originally planned,” it said.

Construction work is expected to start in the spring.

The government announcement was made following a meeting of the ministerial group chaired by the Chancellor of the Exchequer Alistair Darling; Olympics Minister Tessa Jowell and Culture Secretary Andy Burnham are among its members.

With reporting from Mark Bisson.

For general comments or questions,

click here