An independent review into the financial mismanagement of the London Stadium, currently home to West Ham United after its conversion from the central venue for the 2012 Olympic games, has revealed just how much the project cost and continues to cost taxpayers.
Following a bidding process where prospective tenants submitted proposals, West Ham were awarded the primary use of the venue after the Olympics and eventually moved into the stadium in the summer of 2016 after conversion work had been completed.
This morning I’ve published the independent review into the mismanagement of London Stadium finances by the former Mayor. It reveals a catalogue of errors that has left the taxpayer to foot an annual loss of around £20 million. https://t.co/2jPdBI38Nf pic.twitter.com/7p7N4CX1K3— Sadiq Khan (@SadiqKhan) December 1, 2017
The report, ordered and published London mayor Sadiq Khan, revealed that the total cost of the planned conversion massively exceeded the original £190m estimation and soared to £323m.
Former London mayor Boris Johnson, who first approved West Ham as preferred bidders in 2011, has been accused of leaving the finances of the project in a 'dreadful mess' by the Mayor of the London borough of Newham, Sir Robin Wales.
The burden of the cost of the stadium is on taxpayers rather than the private sector, with the report estimating substantial losses year on year as the current agreement with West Ham cannot generate enough to cover the running costs of the stadium, which are not paid for the club.
The report explains: "Presently, the investment by the public purse in the Stadium transformation is not only unlikely ever to be recovered, it will on present figures be likely to worsen year by year at the rate of some £10m to £20m per year, due to expected operating losses."
Tottenham's unfancied plan for the site was to literally demolish the existing venue, which was only initially built as a temporary structure - hence the need for extensive conversion work - and rebuild a brand new football specific stadium in its place.
That would have meant removing the athletics track, but as part of the project the club had also promised to regenerate the existing London athletics venue at Crystal Palace in order to preserve the city's track and field legacy post-Olympics.
The total projected cost for the full demolition, rebuild and associated regeneration came in at £323m, ultimately the same as what has actually been spent just on converting the stadium for use as a football stadium for West Ham.
London Stadium: Report finds Boris Johnson gave stadium to West Ham, £323m conversion cost, and took all the expense & risk off PL club, onto public sector.— David Conn (@david_conn) December 1, 2017
West Ham's bid vowed to keep the athletics track, but fears and doubts about how the atmosphere might be negatively affected led to expensive plans for retractable seating, helping to drive the cost up.
Following Tottenham's exit from the process after the initial bidding competition was cancelled and the decision made that the stadium be owned and paid for by the public sector, the report notes how West Ham changed their plan in the second round of bidding.
It argues that the club is likely to have been aware that there was no longer genuine competition and therefore submitted a plan that was much less favourable in terms of costs/work involved - changing from a concession to a leasehold basis and requiring that seating be closer to the pitch, which also necessitated further roof work.
In the first round of bidding, West Ham's proposal estimated £95m in costs. That figure had doubled by the second round of competition as a result of the changes. It was also far from a concrete estimate at £190m and the costs later spiralled out of control to the £323m already mentioned.
The report makes it clear that West Ham cannot be accused of any foul play as they were perfectly within their rights to change their bid. Their offer remained the strongest, but the report also raises the key issue as to whether the stadium should have been granted at all on such terms.
The deal that emerged is described as creating a 'poor commercial outcome' and the London Legacy Development Corporation (LLDC) is accused mis-appraising the likely costs and risks.
London Stadium: Spurs bid to demolish & build new stadium cost £323m, £35m public money. Boris Johnson conversion for West Ham cost £323m, £291.5m public money.— David Conn (@david_conn) December 1, 2017
The report explains a number of ways it believes LLDC could have structured different deals with West Ham to ensure minimal risk or losses, such as imposing greater rents and usage fees in light of the club bearing no stadium, operating costs, or granting the club the opportunity to source a naming rights deal and taking a share of the value.
The report suggests that the potential for the losses the stadium has incurred were 'foreseeable'.
Khan will now take control of the stadium in an attempt to renegotiate the existing deals and minimise the ongoing losses. West Ham stand by the contract they entered, but have welcomed the mayor's decision to step in, accepting a need for 'renewed leadership and direction'.