By Avril Ormsby
The credit crunch could have a silver lining for the hard-pressed organisers of the London 2012 Olympics who can now scale back their grand designs with the full blessing of the public and the IOC.
The rationing and homemade kit of 1948 when war-weary London's hosting was dubbed the ‘Austerity Games’ should not be necessary this time, but athletes arriving in 2012 will not be greeted by the mega-structures of Beijing.
Flat-pack stadiums are likely to be the order of the day while several of the original bid's planned temporary venues could be scrapped for existing buildings in an effort to stay within the £9.3bn (€12bn) budget.
In normal circumstances the International Olympic Committee would frown upon changes to the original bid document. Times have changed, however, and cost-cutting measures could even get a nod of approval from the corridors of power in Lausanne.
Chris Higson, professor of accounting at the London Business School, said the credit crisis provided the opportunity to pare down ambitions ‘without losing face’.
On Wednesday, cabinet ministers meet to discuss security planning for 2012 primarily but financing the Games is likely to be very much part of the debate too given the growing concerns surrounding the country's ability to bankroll an Olympics.
Fencing has already been moved to a shared venue, while the shooting, basketball and equestrian sites are under review.
‘Clearly in the current economic climate it is prudent to look at our temporary venues to see what other alternatives may exist using permanent structures. This process is under way,’ a 2012 statement said on Tuesday.
London has plenty of options in terms of sporting venues, but the biggest concerns surround the two public-private sector projects in the Olympic Park - the estimated £1bn (€1.29bn) athletes' village and the £400m (€516m) media centre.
An inability to secure bank loans could result in a possible shortfall of up to £250m (€323m), Olympic authorities said.
The slump in property prices, which could damage the chances of recouping money from the athletes' village after the Games, has also resulted in the number of post-Olympics apartments being reduced from 4,200 to 3,000.
Athletes at the 2012 Games are therefore unlikely to have as much living space as they enjoyed in Beijing.
Australian developer Lend Lease, which is building the athletes' village, acknowledged there had been delays in securing financing, but said it expected to finalise arrangements by the end of the year.
‘Lend Lease's equity contribution is subject to this funding being in place,’ it warned in a statement in June.
Failure to secure the funds could result in the village being nationalised.
Special Sharia-compliant bonds are being considered by the government to help fund the village or other facilities, but it has not entered any formal discussions so far.
The deal with the private sector to build the media and broadcast centre is also in doubt. The 1.3 million square-foot area may have to be scaled back post-Games because an anchor tenant cannot be found.
The economic downturn could allow the government to play ‘hard-ball’ with the IOC over the scale of the Games and the contractors over price, Professor Higson said.
Steel and commodity prices are falling and labour costs may no longer be at such a high premium, he added.
The professor pointed out that the Olympics provides an opportunity to energise the labour market.
‘We do not know what the real impact of the credit crunch will be with the economy, though past experience shows it will be severe, but you could argue it is the classic prescription for Keynesian economics - large public work projects at a time of unemployment.’
The Greater London Authority has escaped the banking crisis in Iceland, unlike dozens of other British local councils.
But the Metropolitan Police Authority said it has £30m (€38) of deposits in a collapsed bank, though a spokesman for the Metropolitan Police said security at the Games would not be affected.
The operational cost of the Games is to be met by a private sector budget of £2bn (€2.6bn), £650m (€839m) of which is to come from London's domestic sponsors.
The London Organising Committee of the Olympic Games (LOCOG) said companies had not been put off by the credit crisis, with more than £400m (€516m) having been raised so far.
‘Since Beijing there has been a large amount of interest,’ a spokeswoman said. ‘Companies have seen what a positive impact the Games can have on a country.’
One of its Tier One sponsors is Lloyds TSB which on Monday said it would take billions of pounds of taxpayers' money in a government financial bailout.
It said the current financial environment ‘reinforces our commitment’ to the Games.