Olympic chiefs deny South East building costs will spiral

Olympic leaders have dismissed fears the Games will send building costs in London and the South East soaring by £4bn between now and 2012.

It follows claims by campaigners at the Taxpayers Alliance that the Olympic building programme will ramp-up construction inflation by 1.25% due to the massive amount of work in the area.

But politicians and 2012 organisers believe the 'Olympic effect' is being overestimated by the tax watchdogs.

A spokesman for the Department for Culture Media and Sport said: "2012 is a big project, but it is important not to get it out of perspective and to lose sight of the very substantial other work going on at the same time, including T5 and Thameslink. Any increase in construction inflation is likely to only be attributable in very small part to a 2012 knock-on effect."

Leaders of the Alliance have set up a '2012 Watchdog' to monitor the costs of the Games. Its figures estimate the Olympics will add 1.25% to construction inflation every year until 2012 - adding up to a total of an extra £3.9bn.

Policy analyst Matthew Sinclair said: "Increasing the cost of construction in London and the South East is not only hazardous to the health of the British economy, but also imperils the objective of getting enough new homes built to make things easier for first-time buyers.

"The bigger the bill for the Olympics becomes, the more damaging this knock-on hidden cost will be."

The figures are based on tender price inflation estimates from consultant EC Harris. But head of cost research Paul Moore said: "They have used our inflation figures, but seem to have overestimated the numbers by about 50% when coming up with these increases.

"This is spending on vital infrastructure, which will be a benefit to the general economy."

One Olympic source said: "These numbers don't really stand up to close examination and if you took this line then nothing would ever get built in case it added to inflationary pressure."

(Contract Journal, 15 August 2007, p 3)

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