Public money to fund Olympic Village
The government has rejected a £375 million private sector bid from Lend Lease in favour of public sector cash to fund the construction and development of the 2012 Olympic Village in East London
The Department for Culture, Media and Sport said on Wednesday it would invest a further £324 million from contingency and cash savings, claiming a private sector deal would prove too risky in the current climate.
Minister for the Olympic and Paralympic Games Tessa Jowell said: ‘After careful assessment it is clear that investing in the Olympic Village now will save public money in the long term.
‘A private sector deal was available, but because of the credit crunch it was not a good deal. By funding the entire project the Village will become publicly owned and the public purse will receive substantial returns from sales. The ODA will make a fresh assessment of the market nearer to completion with a view to pursuing deals with other possible investors.’
Architects working on the Olympic Village are wary of the announcement however. One source close to the project said: ‘It is not ideal. As it is the government it will have to be extra cautious and prove that everything is transparent and be seen to be making the right decision. It will mean a whole new level of bureacracy and oversight to the scheme.
‘There will be a lot of pressure to do things as cheaply as possible. Everyone talks about long-term quality but most people are concerned about immediate costs.’
Jowell added that £1.3 billion of contingency remains, with a third of construction completed. The budget of £9.3 billion will remain unchanged she confirmed.
Lend Lease issued a statement clarifying that it will continue as construction and development manager of the village, under an existing agreement signed in August 2008.
Dan Labbad, chief executive officer, Lend Lease Europe, said: ‘Lend Lease submitted a highly competitive bid which offered to invest equity of £150 million in the project but the government and the ODA have decided that the overall risk return criteria for this type of project in the current market environment is not conducive to private funding.’