2012 Olympic village faces big shortfall

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Work on the Olympic village, the most costly part of the 2012 project at one billion pounds, has already begun but developer Land Lease is struggling to secure bank loans.

"We are in line with budgets, but there are factors that we can't control and one example of that is what is happening in the city with the credit crunch," Olympic Delivery Authority (ODA) chairman John Armitt told members of the London Assembly.

"The village and broadcast centre were planned in one economic environment and are having to be delivered in another. The credit crunch is hitting the Olympics hard but we remain resilient, we are taking the necessary steps to protect delivery and keep the use of contingency to a minimum."

In July the ODA said the number of dwellings to be left on the village site in legacy mode had been reduced from 4,200 to 3,300 because of the fall in house prices.

"We have the finance in place for everything except elements of the Village and broadcast centre," Armitt told the BBC, adding that a ball park figure for the shortfall was "between 200 and 250 million pounds.

"We will continue to negotiate and see where we get to at the end of the day, but it will take a while before we reach a conclusion," he said.

A two billion pounds in contingency fund is included within the 9.3 billion-pound budget for building the Games venues and redeveloping the Olympic Park in east London.

Armitt said some of that contingency would be needed for the village, whatever the outcome of the funding negotiations. He also said delaying the start of the village was not an option.

"If we had waited for the financial agreements to be signed then completion of the project in time would have been in significant jeopardy," he said.

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