Doubts over contractor Carillion Igloo's ability to secure funding in present climate
The £400m media centre for the London Olympics could be in jeopardy because of a lack of funds, the Times has reported.
Construction of the press and broadcast centre, which will hold 20,000 journalists, is scheduled to start in the spring, with two buildings that will provide 120,800m2 of office space after the Games.
According to the Times, the centre could become the second credit-crunch casualty in the government's £9.3bn Olympics construction project, as banks rein in lending for property-backed deals.
Lend Lease's £1bn Athletes Village in east London, the largest element of the 200ha Olympic Park, has already faced funding issues, with Olympic bosses struggling to raise money from the private sector.
Now concerns have arisen over the ability of the consortium awarded the contract to build the media centre, Carillion Igloo, to raise money from banks to cover its £200m share of the cost.
A senior Olympics source told the Times: “It's difficult because in this climate, no one wants to lend.”
If no private financing is available, the government could be forced to raid a £1bn contingency fund, set aside for unforeseen events.
The emergency money forms part of the £9.3bn budget that ministers promised would be the maximum cost to taxpayers of the 2012 Games. Using nearly all of the cash, with four years still to go, would leave the government with little financial flexibility to accommodate overruns in any other parts of the budget, such as security.
The next Games funders' group meeting is next month.
It had been expected that Lend Lease would provide £450m to fund the Athletes Village, alongside a £550m public contribution from the Olympic Delivery Authority (ODA), but its banks, led by Barclays, Lloyds and RBS, have got cold feet about financing a deal based on speculative property valuations, said the Times.
The ODA is hoping to recoup £250m once the site is converted into a residential development with 3,500 homes, but as property prices continue to decline those involved could find it impossible to agree on what these values might be in 2013.
Speaking at a fringe meeting at the Labour Party conference in Manchester on Monday, ODA chairman John Armitt said: “The reality is that the situation is changing by the day. The amount of financing available two months ago was less than six months ago, and it's even less after last week.”
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