Results tagged “Olympics” from Birmingham Post - Business Blog

We've heard suggestions before that the London Olympics is going to suck money out of the regions.

Our own market square project for Kings Heath could be the sort of minor victim if, as one voice suggested at a recent meeting, all the Lottery money is going to pay for the spiralling Olympic costs. Without this it would have come our way for local regeneration projects of course (?)

There's also the suggestion I've heard that the massive construction projects in East London, as well as CrossRail etc, will increase the demand for labour and building materials so that the price for other UK projects (such as New Street Station?) are forced upwards.

If anyone has got any ideas whether either of these will actually materialise, please let me know.

But here's a new one on me. The global cost of steel is, I'm told, being forced up by the Beijing Olympics, now only a few months away.

There's a very noteworthy story hidden in the business section of today's Post. In a week of bad news about the Beijing Games, the Olympic Delivery Authority (ODA) has announced that the contracts for the main stadium and the swimming pool (we have to call it the aquatic centre, but a swimming pool's a swimming pool in my book) have been signed.

I am a huge fan of the Olympics coming to London and I really want them to be a success. It's not just that I want Team GB to win lots of medals (and I do) - I would also be delighted if the venues are all built on time (let's face it, they have to be) and on budget.

And what a budget! The ODA's press release proudly announces that the contracts are "within its baseline budget of £6.09 billion" with "no call on programme contingency at this stage". Of the £6 billion, the stadium is going to cost £496 million and the pool a further £242 million. They should be fantastic buildings - the pool is designed by the world-renowned architect Zaha Hadid and the team behind the main stadium are fresh from having procured the Emirates Stadium for Arsenal.

But what if something goes wrong? Take Wembley - it was finally finished 2 years late with the costs overrun currently being fought over in the courts. Can we avoid a repeat?

The problem (or potential problem) is that construction contracts are inherently risky. Lots of things can happen that will add to either the time it takes to complete the buildings or the cost (or both). If there is a finite budget that won't increase, the ODA and its builders have to sign up to contracts which ascribe responsibility for certain problems. Who bears the risk if the site is flooded and unworkable for one month? What if the design changes? Now the ODA aren't daft - and have expressly provided for a contingency to deal with unforeseen events.

But the entire project has been beset with cost increases. When we won the Games in July 2005, the cost was announced as £2.4 billion. Last March, Tessa Jowell announced that the construction costs would be £5.3 billion (more than twice the original estimate) with a further contingency of £2.7 billion.

A year on, and whilst it's great to be told that the contingency doesn't need to be touched, the base build cost appears to have increased by a further £800 million. My concern is that each increase detracts from public confidence in the project.

So the answer to the question posed by this blog is that I have no actual idea what the cost will be. And I wish that wasn't the case.