The organisers of London’s 2012 Olympic Games may have to tap a government contingency fund for 500 million pounds ($1.25 billion) that they’ve been unable to raise from private sources since the collapse of credit markets.
The Olympic Delivery Authority and Australian developer Lend Lease haven’t secured bank financing for the 1 billion-pound Olympic Village, a 3,000-apartment complex where athletes will stay during the games, and a 400 million-pound broadcast center to be built by a group led by Carillion.
The 500 million pounds is extra money that may be needed for construction, though the amount isn’t final, a spokesman for Tessa Jowell, the Olympics minister, said. The UK government, the delivery authority and developers are still negotiating with banks over possible funding for the village and broadcast center, the spokesman said.
The worst financial crisis since the Great Depression is freezing lending, pushing the world economy toward a recession. The 2012 Olympic Park is Europe’s largest public construction project, with a budget of 9.3 billion pounds, including 2 billion pounds in contingency funds. The government has agreed to provide 95 million pounds for the village so far.
The UK economy shrank more than forecast in the third quarter, evidence that Britain is in the grips of its first recession since 1991. Gross domestic product dropped 0.5% from the second quarter, the first contraction in 16 years, the Office for National Statistics said today. Economists predicted a 0.2%t decline, according to the median of 35 forecasts in a Bloomberg News survey.
The London-based Times reported earlier today that Jowell told a private dinner this week that the credit crunch had left Games organisers unable to raise the 500 million pounds from banks.