Delegates from trade bodies, companies and regional development agencies will meet at a 2012 Olympic Games business summit in London today.
The plan is to talk about games-related commercial opportunities.
The London Operating Committee of the Olympic Games (Locog), the privately-funded operation responsible for running the show, still has an estimated £700million of contracts to award, making today’s gathering potentially very rewarding.
Locog is separate from the publicly-funded Olympic Delivery Authority (ODA) which has already let contracts valued at £5billion, the majority of which, it says, have gone to British firms.
With less than 1,000 days to go before London’s sporting extravaganza gets under way, it’s the turn of Locog to start spending money on almost 1million pieces of sporting equipment – everything from 1,200 hockey balls to 44 paralympic table tennis tables, goods and services.
But today’s summit will not turn into a free-for-all scramble to bag the most lucrative contracts.
Locog chief executive Paul Deighton, who, according to the body’s accounts has deferred more than £185,000 in bonus payments, although his basic salary last year was £453,440, wants companies to bid for the awards through the CompeteFor.com website.
Apart from the online contracts, there’s also ample scope for businesses to get involved in licensing and sponsorship programmes similar to the one model-maker Hornby recently revealed. Hornby has been granted a licence by Locog to produce a range of London 2012 merchandise across its Corgi, Scalextric and Airfix brands.
These will include Corgi diecast model vehicles including London taxis and London buses.
The licence will run for the next three years in the run-up to the 2012 games and beyond.
The commercial proof of such licensing arrangement will be in the Olympic pudding, particularly when the games’ official online shop launches next year, when the Olympic mascot is also revealed.
Deighton anticipates licensees to generate around £1billion in revenues from which Locog will collect between £70million and £80million in fees.
There are still fears that the cost of the games will overrun even more – despite the availability of additional contingency funding of £2.7billion – and this is a scenario which could result in some contracts being pared back. Unforeseen expenditure has accounted for more than half of this money being allocated.
Earlier this year the Olympic village was effectively nationalised after original plans for £1billion of private development financing were finally deemed too optimistic.
Olympics Minister Tessa Jowell confirmed that £261million in contingency funding had been released to complete the village, taking the taxpayers’ total commitment to the project to £650million.
The ODA remains hopeful that the damaging impact of the financial crisis has now been fully absorbed and will not threaten the contingency funding balance further.
But the ODA estimates that an additional £700million may be required to complete the project.
According to Jowell, the decision to nationalise the Olympic village represents good value to taxpayers and that spending will eventually be recouped from the sale of the site’s apartments. But claims of £500million being recouped after 2012 from a combination of residential and commercial sales are wildly optimistic.
There is concern that opposition to the burgeoning level of Olympic spending has been silenced since it became clear that the original estimated costs were ridiculously low.
This situation was exacerbated on Sunday when Deighton revealed that, after the IOC awarded London the 2012 games based on those original cost estimates: “The Olympic project was re-scoped to a greater level of ambition because we wanted to capture the legacy opportunity in Stratford.”
According to Deighton, the decision to include the re-generation of an area of east London ensured the first ODA budget was bigger than the bid estimate.
The problem is, this was not the basis on which London’s bid was made, nor was it the basis on which public support was drummed-up before the IOC took its decision. The likelihood that London’s Olympics will turn a profit is negligible and Deighton has admitted Locog is not focused on making money.
Instead, he said, “We’re looking to put on a brilliant games that really works. To leave behind all those legacies and to improve the brand.”
Such gibberish cuts less and less ice with the taxpayers and Lottery players who are funding the whole party.
They’re not daft.
They know that the basis on which London was awarded the 2012 games has been substantially changed and that the cost of staging them has at least trebled as a consequence.
Being capable of hosting a 17-day sporting event “that really works” with at least £9.3billion at your disposal should be a given.
Furthermore, it is surely the IOC’s role to improve its Olympic brand, not that of Locog.