27 Jun 2012

A sporting chance: the Olympic debate

A political vanity project or a fillip to a struggling economy? Joanna Higgins asks those involved and outside observers how the Olympics will impact on the economy, and the legacy it will leave for London and the UK

The debate

The developers
Sir John Armitt, Chairman, ODA
Neale Coleman, director, London 2012 at the Greater London Authority
Duncan Flint, communications manager, Dorset 2012

British business
Hannah Holmes, director, Merrythought
Raj Tulsiani, CEO, Green Park interim management

The sports lobby
Andy Sutch, executive director, Business in Sport and Leisure
Peter Grant, senior fellow, Cass Business School

The economists
Richard Jackman, professor of economics, LSE
Raymond Sauer, economics professor, Clemson University

The legacy architects
Rosanna Lawes, director of development, London Legacy Development Corporation
Stuart Corbyn, chairman, QDD
Iain Edmondson, head of major events, London & Parnters

The past masters
Alan Marsh, CEO, Sydney Olympic Park Authority
Frances Done CBE, chief executive, Manchester 2002 Commonwealth Games

How Olympic funding works

A lot has been made of the £9.3bn total cost of organising and hosting London 2012. It compares to £4bn for Sydney 2000, £7bn for Athens in 2004 and an eye-watering £20bn for Beijing in 2008.

But Olympic finances are highly complex and alongside the funding from central government (67%), the Lottery (23%) and London (LDA & GLA 10%), the Games also attracts inward investment:

According to property consultancy CBRE at least £1.6bn of private sector money has been invested in the region around the Olympic Park. Recent investments include:

  • £870m from Canadian Pension Plan Investment Board & Dutch fund APG for a 50% stake in Stratford City;
  • £60m Siemens’ Crystal Knowledge Hub;
  • £200m Stratford Regional Station;
  • £1.3bn LendLease Development of the International Quarter;
  • £1.45bn Westfield;
  • £557m QDD’s purchase of 70 acres of Olympic Village site;
  • £268m Triathlon Homes spend in 2009;
  • £750m – additional spend Olympic sponsor Visa predicts will be spent by fans during the Games; and
  • roughly £670m from an expected 4.2% increase in UK ad spend in 2012 because of the Games.

LOCOG receives its funding through a mix of public and private sources. It has a core budget of £2bn, with revenue raised largely from the private sector via ticket sales, merchandising and sponsorship.

It also receives income from the International Olympic Committee (IOC) as well as getting £66m from the Olympic Lottery Distributor for the Paralympic Games, (which represents one-third of the total Paralympic budget). A further £57.7m comes from public money: this is mainly for crowd, transport and what’s called "movement management".

The Olympic Delivery Authority (ODA) is responsible for venue and infrastructure development, as well as the use of the venues afterwards.

Funding contributes to construction of the venues and the supporting infrastructure in the Olympic Park, the Lea Valley White Water Centre, improved facilities at Weymouth and Portland and Eton Dorney. The ODA is public sector-funded, with budget coming from a range of sources.

The National Lottery provides £2.2bn towards facilities and to help increase wider participation in sport and improve community sports facilities across the country. It also shares profits made from the future sale of land and property.

The Greater London Authority provides £925m for infrastructure, facilities and regeneration throughout London.

Central government provided £12m towards Olympic land debt costs over the next three years.

The London Legacy Development Company (previously the Olympic Park Legacy Company) is jointly owned by the Mayor’s office and the government and is responsible for legacy development.

The Mayoral Development Company takes over planning in October 2012. Its funding includes £290m from central government.

Up to £10m a year until 2013/14 has been committed by the Mayor to support the running of the legacy park.

London taxpayers will contribute around £625m as a contribution to a public sector funding package for the Games.

About £3m was contributed by the London Development Agency to ArcelorMittal’s Orbit (Anish Kapoor’s viewing platform sculpture).

The GLA has also provided an estimated £68.8m to meet the costs of settling compulsory purchase order cases related to the Olympics.

The London Legacy Development Company has a capital expenditure programme of £161.4m for 2012/13, most of which is set aside for transformation work. It will also make a £14m investment in training for Londoners, "particularly workless Londoners".