For a package worth £75,000 a year, Cassani must recruit a world-class FD capable of dealing with the public and private sector at the highest level.
Until the International Olympic Committee chooses the winning bid in July 2005, the bid company, expected to be branded London 2012, will be a sales and marketing-orientated operation. It will face rigorous public scrutiny as representatives travel the world wooing International Olympic Committee voters. The last thing Cassani wants is a repeat of the corruption allegations that plagued organisers of Salt Lake City’s Winter Olympics.
But spending public money trying to win over a select group of officials is always going to attract attention.
Neil Aitken, finance director of the British Olympics Association, and an obvious candidate for the job of bid team FD, believes London 2012 could have to tread a fine line. ‘The FD will have to be clear about what’s going through the accounts, and make sure everything is fully transparent.
With government involvement, this organisation will have to be seen to be doing the right things. It’s a bit of a balancing act, but it’s about transparency and being clear with what’s planned with the spend,’ says Aitken.
It’s been over half a century since London staged the Olympics, and the 2012 games would easily become the biggest event the UK has seen. The government is taking it very seriously. Once the PM had secured unanimous cabinet backing, he phoned International Olympic Committee president Jacques Rogge to inform him of the UK’s commitment to stage the event.
Aitken believes the overall benefit to the country of a successful bid could be practically incalculable. And it won’t just be the capital that sees cash flooding in. ‘There will be plenty of hidden revenues for the whole country. The BOA, for example, spent about £1m in the run-up to the Sydney Olympics on training camps alone. A lot of local businesses and people saw the benefit of that,’ says Aitken.
London 2012 is expected to spend £3.6bn on the project, including building work, and is forecast to bring in around £2.5bn, mainly from TV rights and sponsorship. On top of that, Sydney is thought to have made a further £2bn in tourist revenue. The redevelopment of London’s Lea Valley could help create an estimated 40,000 jobs, 30,000 homes and 1,000 businesses.
Raphael Miller, director of PFI and PPP at BDO Stoy Hayward, believes a future FD of the project should be asking how much funding will be actually secured. The national lottery has been asked to provide £1.5bn for London’s Olympic bid and £250m is expected to come from the London Development Agency, with another £600m coming from council tax rises in London.
But the project is so huge that securing private finance will be crucial, especially when the potential for cost overruns are taken into account.
‘Clearly it’s going to be a project involving both public and private sector stakeholders. The FD must convince private sector partners that the public sector can deliver its side of the bargain. They are going to have to be an adept politician, but also have good relations with the city,’ says Miller.
David Leather, the former finance director of the Manchester Commonwealth Games, and current FD of Manchester Airport, has ruled himself out of the job for the London 2012 bid. Recruitment company Hanover Fox says the package of £75,000 could be too small for some. But Miller believes it is paramount to get someone in the same league as Cassani.
Cassani, who is also a part-time non-executive director at M&S, was chief executive of budget airline GO until it was taken over by Easyjet last year. ‘The FD will have to be someone who is well-known. They will need that for credibility. It’s a unique project and will have to be ready on a specific date so the risk of cost overruns is much larger than your standard project,’ explains Miller.
The scale of the project means overruns as spectacular as 100% are possible.
‘All things considered, 100% is not unreasonable and they will have to build that into development plans. I’m sure it’s not all going to come from the public purse,’ adds Miller.
Athens, which is hosting the 2004 Olympic Games, has rid itself of planning problems by dropping projects. The Greek government had intended to split spending on sports facilities and infrastructure 40/60 in favour of infrastructure.
Instead, it looks likely that infrastructure will receive about 30% of the budget. Plans for the scope of a suburban rail network have been halved and metro extensions put on ice. Landscaping work, which was to include the planting of thousands of trees, has not been carried out.
For 2012, the IOC could do well to pay attention to the infrastructure of bidding countries. ‘The IOC will want to know what’s there already. Nobody wants white elephants,’ says Aitken.
- Consultant Arup estimates the cost of a London Olympics to be £3.6bn
- The cost of overruns could bring the final bill to £7.2bn
- Arup has forecast revenues of £2.5bn
- The government and the mayor of London have agreed a total funding package of £2.4bn
- To cover overruns, the government has so far assumed contingency funding of £1.2bn
- The finance director of London 2012 will receive a package of £75,000.
Does Darwin's theory apply to taxation? Colin ponders...
The EC has been instructed to draft a European Union (EU) directive authorising an EU financial transaction tax, which would apply to ten of the EU’s 28 member states
Accountancy watchdog the FRC has dropped its investigation into the former chief financial officer of Tesco, nearly two years after the supermarket was engulfed in an accounting scandal
Colin imagines how Apple's logo might change in the wake of the EC's ruling over its Irish tax arrangements