MarketLine Blog

The Olympic Stadium and West Ham’s deal of the century

The Olympic Games was held in London in 2012 much to the joy of the majority of the British public. After an arduous bidding process, the London delegates overcame the bid from Paris and scenes of jubilation from famous sports personalities and members of the royal family were filtered around the world. The Olympics is viewed as a festival of sporting accomplishment and it requires a huge investment from the government, and in turn, the people of the nation in which the event is being hosted. Once the bid was successful, a huge construction and redevelopment project started with the building of the Queen Elizabeth Olympic Park and redevelopment of the surrounding area of Stratford.

Even before the event, plans for the future of the stadium were discussed with the initial plan being to scale the stadium back and use it on a part time basis for athletics. However, this was reconsidered by the British Government and it was decided that they would accept bids from businesses and decide which one matched their vision for the stadium whilst paying back money to the British taxpayer. Over 100 businesses registered interest and the bid came down to two main bids one from Tottenham Hotspur Football Club (THFC) and one from West Ham United Football Club (WHUFC). From the start, WHUFC had the clear advantage as they were willing to keep the stadium as it was and convert it into a football stadium rather than demolish it and rebuild it which is what THFC were proposing. There was also the fact that WHUFC are deemed more local to the stadium by a few miles over their rival bidders.

WHUFC won the bid for the stadium and a deal was worked out to convert the stadium to a football stadium which also allows for athletic events. It was revealed that of the conversion costs, WHUFC were only required to contribute 15m (approximately $24.7m) of the initial estimated conversion cost of 160m (approximately $263.5m). This rang alarm bells to a number of interested parties and full disclosure of the deal was demanded. Once the full details of the deal were revealed, it confirmed the general suspicion that WHUFC had managed to negotiate a good deal for themselves but a bad deal for the British taxpayer and their rivals.

WHUFC are due to pay 2.5m (approximately $4.1m) a year in rent for the duration of the 99 year lease which when worked out for the duration, adds up to 247.5m (approximately $407.5m). This is low considering the stadium was built for a total of 701m (approximately $1.2bn) and WHUFC had only contributed 15m towards that sum. It should be noted that WHUFC should not be responsible for the full bill as the stadium served a purpose beforehand but surely there is a clear case for a larger contribution seeing as some of the clubs rivals are having to spend large amounts of privately funded money to have new stadiums and the fact that a lot of public money was invested into a project that benefits a private business. To add to this, some of the stadiums running costs will also be subsidized by public money, which has angered the public further.

In essence, it is believed that WHUFCs excellent deal translates to a raw deal for the British taxpayer. Of course it should be noted that WHUFC were beneficiaries of the surrounding circumstances with location playing a huge part in the bids success. But, for the amount of money spent from public coffers, there is a general sense that the best interests of the British public were not in mind with this deal. Thanks to the deal, we will always have a reminder of the success of the London Olympics with the stadium providing that reminder but it is an expensive memory.

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