SportblogOlympic Stadium
West Ham's Olympic Stadium deal explained: from Water City to the London Stadium
After London's mayor Sadiq Khan ordered an inquiry into the inflated cost of the stadium, a look at how the Hammers got there, and who's footing the bill
The bill for the repurposing of the Olympic Stadium for use by West Ham for football more than doubled from £160m to at least £323m. Photograph: Tom Jenkins for the Guardian
Owen Gibson
@owen_g
Wed 2 Nov 2016 09.30 EDT
The total cost of converting the Olympic Stadium from an athletics stadium into a multi-use venue has soared to £323m, taking the overall cost of West Ham United's new home to £752m – largely borne by taxpayers. How did we get here?
London mayor Sadiq Khan orders inquiry into West Ham stadium costs
How long have you got? The story begins in 2003 when Lord Rogers wrote to Tony Blair suggesting a stadium in Stratford built for football with interim use for athletics as the centrepiece of any Olympics bid, to be funded by joint tenancy between Tottenham Hotspur and West Ham. The Water City scheme foundered over land issues. Once the bid was won in 2005, with Sebastian Coe's promise to retain the running track as a legacy for athletics one factor in swinging votes, there was a determination to get on with building – problems with spiralling costs and delays at Wembley and the embarrassing Picketts Lock fiasco (where plans to host the 2005 World Athletics Championships had to be abandoned) were weighing heavy on the minds of Olympic officials and ministers. Tentative talks with football clubs, including West Ham, had proved inconclusive. As such, at a fateful meeting of the Olympic board in February 2007, it was decided to press on with building an athletics stadium that could easily be become a community facility with a 25,000-seat capacity but was harder to convert to a football stadium. In effect, discussions over the future use of the stadium were parked.
When did football re-enter the equation?
With Boris Johnson, and his love of eye-catching projects, replacing Ken Livingstone in 2008 and the coalition government coming to power in 2010 the idea of finding a solution that would enable the stadium to be retained as a larger, dual-use facility gained popularity. In order to make the finances work, a Premier League football club was considered a prerequisite. The Olympic Park Legacy Company launched a contest for the stadium. Encouraged to provide West Ham with some competition by Johnson, Spurs proposed to knock down the stadium and rebuild it for football, upgrading Crystal Palace as an athletics venue. That idea met a furious backlash from Coe and others involved in the Olympic bid who said it would be a betrayal of the promised athletics legacy. Following a bitter, controversial battle - including allegations of spying, phone hacking and industrial espionage – West Ham were awarded the stadium in February 2011.
Why did they did not move in sooner?
The plan for West Ham to take over the stadium was challenged in the courts by Spurs and Leyton Orient and the whole plan had to be scrapped when a complaint was made to the European Commission on state aid grounds. The contest was relaunched, with West Ham – effectively by now the only game in town – this time emerging as tenants rather than leaseholders following a long and bruising negotiation. The 99-year agreement was finally confirmed in March 2013 and work began in earnest to convert the stadium so it could become West Ham's home ground and then used for athletics, concerts and other events in the summer.
What was the bill for the conversion?
Because the original canopy covered only two-third of the seats, the initial estimated cost was £160m to build a new cantilevered roof, the largest of its kind in the world – using technology developed for use on North Sea oil rigs – and to install 21,000 state of the art retractable seats that would bring the lower tiers closer to the action and assuage fears of fans who worried it would not be suitable for football. Permanent toilets, catering facilities, executive boxes and so on also had to be built. In essence, the stadium had to be almost rebuilt from scratch from the inside out as a 54,000 capacity dual-use arena.
Who paid what?
The largest chunk of funding for the transformation comes from a one-off settlement of £148.8m from the exchequer in 2010. On top of that Newham council provided £40m through a loan (in return for a 35% stake), almost £40m came from the original £9.3bn budget for the Olympics and a further £25m from the government. UK Athletics invested £1m and the London Marathon Charitable Trust provided £3.5m.
West Ham agreed to pay £15m towards the overall conversion costs, plus a basic £2.5m a year in rent. The rest of the conversion budget is funded by London Legacy Development Corporation (LLDC). Following a long freedom of information battle, campaigners eventually uncovered the detailed terms of the contract – including extra payments by West Ham if they succeeded on the pitch but reductions in the annual rent if they were relegated. In return the joint venture between LLDC and Newham council that owns the stadium meets all the running costs. Under various formulae, West Ham also share in profits from hospitality and catering.
Critics said West Ham had secured "the deal of the century" at the expense of the taxpayer. The club, who hoped to use the move from Upton Park as a springboard to boost revenues, attendance and their status (as signified by adding the word London to their badge), contended that only they could offer the stadium a sustainable future free of subsidy and that the deal was fair for all parties.
Why did costs rise?
It quickly became clear that the £160m budgeted would not be enough. First, the costs rose to £193.3m as a result of difficulties that the constructor Balfour Beatty experienced building the cantilevered roof and in the face of challenging weather conditions. In June last year the price rose to £272m. This was presented as a final budget, although with the caveat that costs could yet rise further. As the blame game intensified, Johnson turned on the pre-Games planners. "A very bad call was made when those in charge at the time backed a stadium construction plan that would leave the Olympic Park with a much smaller, mouldering and tumbleweed ridden arena following the Games," he said. "Following that plan would have literally torn the heart out of the park and put at risk the incredible economic regeneration we are now seeing in east London."
And now the cost has risen even further?
Yes. It is now estimated that the total bill for the conversion will be at least £323m – more than twice the original estimate. Added to the final cost of building the Olympic Stadium (put at £429m by the Olympic Delivery Authority) the final bill for the rebuilt, renamed London Stadium now stands at £752m.
Why has the bill risen again?
One factor is that the retractable seats – supposed to be the jewel in the crown of the design – have encountered problems that have pushed costs from £300,000 to an estimated £8m. It has also emerged that they will take longer to shift from football mode to athletics mode than anticipated, threatening the revenue-generating potential for the French operators, Vinci, employed on a 20-year contract. Another factor is the cost of the ambitious wrap and huge digital screen that will soon greet fans when they arrive at the stadium. Following typically intensive negotiations with West Ham, the E20 Stadium Partnership (the special purpose vehicle formed by Newham and LLDC that owns the stadium) is meeting most of the costs.
Why has Sadiq Khan, the London mayor, launched an inquiry now?
Partly to get to the bottom of what has gone wrong. But also because, politically, it makes sense for a Labour mayor to pin the blame for the problems on Johnson's administration. It may not be a coincidence that the new inquiry, which will report jointly to Newham council, comes as Khan also questions his spending on everything from the regeneration project at Old Oak Common in the north-west of the city – like the stadium, this week branded "a mess" – to plans for the Garden Bridge over the Thames.
The new inquiry also comes at a particularly sensitive time for LLDC and for West Ham. Already under pressure, rightly or wrongly, over the perception that West Ham were gifted the stadium at the expense of taxpayers, the first few months in their new home have been far from smooth for the east London club. Serious problems with the migration of fans from Upton Park and problems with stewarding have cast a pall.
Last week, the negative publicity continued with television pictures of fans posturing and hurling seats and coins inside the stadium during the EFL Cup tie against Chelsea. The various relationships between West Ham, LS185 (the stadium operator), LLDC and Newham have remained strained. The new questions over rising costs and how they are met will only increase that tension.
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