London's mayor told organizers of the 2012 Olympics on Wednesday to keep the budget from spiraling out of control after a study found that building costs increased by £106 million (US$207 million) in the last seven months.
London Mayor Boris Johnson issued the plea after going through the high-level study he commissioned last month after unseating incumbent Ken Livingstone amid concerns about the effect of the global turmoil in the financial markets on the Olympic budget.
“We are four years out and now is the time to have a really hard think about the problems which lie ahead,” said Johnson, who also sits on the London Olympic Board.
“We have got to stop the costs going out of control. We have got to get the security right and that we know where we are going — not just in four years time, but in 14, 24 years’ time with the legacy,” he said. “What are we going to turn these great investments into? How are they going to be for the benefit of future generations?”
Since November, the cost of the 80,000-seat Olympic Stadium, which will be built by a consortium involving Sir Robert McAlpine, HOK Sport and Buro Happold, has alone risen from £496 million (then US$976.2 million) to £525 million. That includes the price of converting the stadium to a 25,000-seat athletics venue after the Games.
Lend Lease, the Australian-based property giant developing the Olympic Village, said in the report that it was struggling to secure the private financing to make the project viable.
The overall cost of the Olympics — including regeneration of a rundown East London area into an Olympic Park — has been projected at £9.325 billion.
“Containing cost pressures and avoiding further calls on the contingency will be difficult and require sustained effort to manage contractors effectively,” the report by business tycoon David Ross said.
He said that “significant” funding from the government would be required to complete the project.
“The illiquidity of the banking system and falling house prices have had serious implications for the original arrangements between the [Olympics Delivery Authority] and Lend Lease,” Ross wrote. “Lend Lease is currently having difficulty in both securing the private finance necessary to finalize the transaction and in determining what additional funding is required to make the project viable.”
The government department responsible for delivering the Games said the overall costs would not increase.
“It is inevitable in a project of this complexity that projected costs will rise and fall over time,” the department of culture, media and sport said. “Some, for infrastructure, are currently lower than expected, but we are working to reduce any that may be rising at this time. Individual venue budgets remain unaltered.”
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