The Mayor of London, Sadiq Khan, has taken control of the London Stadium as he looks to renegotiate deals and minimise ongoing losses at the home of West Ham United FC.
The move comes after a report revealed former Mayor Boris Johnson’s decision for the taxpayer – not West Ham – to foot the bill for the Stadium transformation was made without proper analysis, leading to an ‘expensive’ and ‘onerous’ deal.
Costs of transformation came in at £133 million more than the ‘incorrect’ and error-ridden estimates when West Ham deal signed, the report said.
London Stadium is forecast to lose £24 million in 2017-18.
Khan is now taking over control of the London Stadium to put it on a more secure financial footing and – through the London Legacy Development Corporation – is putting together a plan to ensure its long-term future as a world-class multi-purpose venue and to continue providing community benefits.
The review by forensic accountants Moore Stephens, commissioned by Khan in March this year, reveals for the first time how the £323 million cost of transforming the stadium was significantly higher than the ‘unrealistic’ estimate of £190 million, which the review concludes was never properly scrutinised.
This failure was further compounded by the previous Mayor’s decision for the stadium to host Rugby World Cup games in 2015, which added extra delays, disruption and costs to the construction programme and put the July 2016 re-opening ahead of the start of the Premier League season at considerable risk, according to the review.
The review also says the investment by the public purse will not only never be recovered but has forecast that unless further action is taken, the stadium will continue to lose up to around £20 million every year.
The former Mayor tied the taxpayer into binding contracts with West Ham United and UK Athletics, severely limiting the present Mayor’s options, it added.
The London Legacy Development Corporation, backed by the current Mayor, has been funding the Stadium’s losses since July 2017, enabling the IAAF World Athletics Championships and IPC World Para Athletics Championships to take place and West Ham to begin their season.
Without this funding, the E20 partnership, formed of LLDC and the London Borough of Newham, who own the Stadium, would have entered administration and the current Mayor would have been liable under his predecessor’s agreements to pay significant damages to the event organisers.
As a result, Khan has agreed with the Mayor of Newham, Sir Robin Wales, that it will be easier to address these financial challenges with a single organisation taking full control. Consequently, Newham Council has withdrawn from the E20 partnership, with LLDC and City Hall agreeing the stadium will continue to provide community benefits to residents in east London.
Khan will seek to work with West Ham, UK Athletics and other stadium partners to address the flaws in existing arrangements to the benefit of the taxpayer and all connected with the stadium. Khan, said:
I ordered the review into the finances of the London Stadium to understand how key decisions were made about its transformation and why costs were allowed to spiral out of control. What has been presented is simply staggering. Not for the first time, it reveals a bungled decision-making process that has the previous Mayor’s fingerprints all over it.
Boris Johnson clearly panicked when faced with legal challenges about West Ham and Newham’s joint bid to take ownership of the Stadium and then decided to re-run the bid process with the taxpayer taking all the risks and footing almost the whole bill. You simply couldn’t make it up. The fact he also failed to properly examine the transformation costs or the entirely inadequate estimates for moving the retractable seats leaves us squarely in the dire financial situation we are in.
I am determined to put the London Stadium towards a stronger financial footing and secure its long-term future, but I’m under no illusion that this is going to take time and some real commitment from all partners to make this work.