Newham

Newham Council agrees future ownership and legacy benefits of London Stadium

1 December 2017 in 2012 Games and legacy and Council and democracy and Mayor
Newham Council has today agreed a deal to help secure a sustainable future for the London Stadium and deliver the Olympic and Paralympic legacy promises made to its residents.
The deal will see Newham retire from the ownership of the London Stadium in return for community and regeneration benefits for all Newham residents over the next 100 years.

The council’s long term vision of the London Stadium as a world-class, vibrant and multi-purpose stadium, has been achieved. The stadium anchors Queen Elizabeth Olympic Park (QEOP), which continues to draw investment and regeneration to Newham and wider East London.

Newham’s vision for the stadium was rooted in a determination to avoid the kind of post Olympic and Paralympic “white elephant” future suffered by so many other host venues such as Athens, Beijing and, most recently, Rio.

In 2011, Newham’s full council voted unanimously to invest £40 million into the stadium business, which subsequently became known as E20.

In March 2013, the council formed Newham Legacy Investments (NLI) which in turn invested the £40 million into E20. This enabled the council to purchase 35 per cent of the stadium business. The joint investment between the London Legacy Delivery Corporation (LLDC) and the council ensured the transformation of the stadium in the post Olympic and Paralympic era, with the intention of delivering substantial community and regeneration benefits for Newham residents.

The fact that the stadium remained a public asset in public ownership ensured a number of regeneration opportunities in Newham and elsewhere could be realised.

In order to support the stadium business, Newham Council invested a further £12.2 million in working capital and additional investment between February 2015 and June 2017.

Newham’s total investment in the stadium was £52.2 million. The council is certain the decision to invest was the right one as its estimates show the value in regeneration, community and other financial benefits over the next 25 years far exceed the investment. The council expects the value accruing from current and future developments in Newham to be between £70 million and £100 million. This is a mixture of direct income generated and the unlocked value of land through regeneration. It excludes the additional value of the community benefits secured as a result of the council’s investment.

The key returns on the investment are:
  • The retention of a world-class, vibrant and multi-purpose stadium hosting premium sporting and entertainment events all year round. The stadium anchors QEOP and guarantees vibrant visitor-led business opportunities in the future
  • At least 3.4 million extra visitors to Stratford and QEOP for events since the end of the 2012 Olympic and Paralympic Games with a significant economic boost to Newham
  • Regeneration of QEOP, bringing employment opportunities and housing
  • Redevelopment of the former Boleyn Ground stadium at Upton Park, delivering 842 new homes, of which 211 will be affordable homes owned by Newham Council, with associated increases in direct and indirect income to Newham in addition to a brand new community centre
  • The redevelopment opportunity of at least five hundred new homes at the Terence McMillan stadium site in Newham (the former home of the community running track) and the delivery of the new London Marathon Trust community running track adjacent to the London Stadium – the new home of the Newham and Essex Beagles Athletic Club
  • Access for Newham residents to top sporting and entertainment events with thousands of free tickets distributed by the council every year over the next 100 years
  • Access to the stadium for up to 10 community days a year, to host events such as the Great Newham London Run and other community events hosted by Newham Council.
Despite these huge gains for the borough, as a result of the widely reported difficulties with onerous stadium contracts, stewarding costs and the massively underestimated costs of retractable seating to support non-footballing activity, the council received a business plan from E20 in October 2016 which indicated there was likely to be an ongoing deficit including material risks to the business plan which could make it  financially unsustainable in the long term.

As co-owners of the stadium, the council had exposure to these potential future losses.

As a result, the council launched an internal review of the stadium business and the contractual structures to understand how E20’s financial position might be improved and to explore the council’s future options in relation to its involvement in E20.

At the same time the new Mayor of London launched an independent inquiry into the stadium through Moore Stephens UK.

In March 2017, the E20 auditors advised the E20 board of their view that the contracts in place at the stadium were onerous. As a result, the council advised E20 it would only invest further working capital so that an Independent Business Review could be commissioned. The council also asked E20 to produce a sustainable business plan to turn around the fortunes of E20.

In June 2017 the council took the decision to halt further payments to E20 as the outcome of the Independent Business Review demonstrated the absence of a sustainable business plan without significant long term investment.

In September 2017, following discussion between the Mayors of London and Newham, it was agreed in principle the best way forward to resolve the challenges of E20 was a one owner model and that as majority shareholder this would be under the Mayor of London. Newham Council offered to voluntarily retire from E20. This decision to retire limits any future liabilities for the council, and will guarantee promised community benefits are secured and continue to be delivered. The council remains committed to working with all partners to make sure the stadium is a financial and wider success.

As part of the deal, the council accepts that its original £40 million investment will not be repaid. However the council stands by the decision to invest as it believes the value of the benefits considerably outweighs the full £52.2 million invested.

Mayor of Newham Sir Robin Wales said:

“On behalf of Newham residents, I am angry that the deals and decisions made by the former Mayor of London and his administration have left the stadium finances in such a dreadful mess.”

“It is regrettable that the finances of the stadium have not followed the expected course. It was vital for Newham however that the stadium remained a public asset in public ownership, to maximise its regeneration, community and other financial benefits.

“Without our investment, the East End would have been blighted with a second-class athletics-only stadium which would be used for only a handful of days every year. It is clear to me therefore that had we not invested we would  now be sitting with a stadium left idle or in ruins, a white elephant, like so many previous Olympic venues. These unused, unloved venues brand the hosts with the scars of decay and failure, the very opposite of regeneration, legacy and economic growth. It was a spectre we could not afford to have at the heart of our borough.

“It was our involvement that ensured the Stadium was transformed into a multi-purpose venue. It was our involvement that ensured a community benefits package. It was our involvement that brought jobs, regeneration and growth to Newham.

“Newham’s end of the deal was to provide the £40 million required to deliver the stadium transformation. Our investment helped create a world-class multi-purpose venue, which is now used year round to host national and international sporting and entertainment events. The former Mayor of London and his administration were exclusively responsible for making the decisions and signing the contracts to bring the business into the stadium, including agreements with West Ham United, UK Athletics and the stadium operators. This council was excluded from those negotiations due to our previous relationship with West Ham United. It is now clear that they completely failed to hold up their end of the bargain, which has led us to where we are today.

“Our decision to invest was based on the entirely reasonable assumption that the previous Mayoral administration carried out its contract negotiations for E20 with due diligence. Those contracts have now been found to be onerous and, if the stadium is to return to profitability, they must be revisited by the new Mayor of London and his team. I am confident the mess left behind by the previous London Mayoral administration can be turned around by the Mayor of London and his team. We remain committed to working with Sadiq Khan to ensure the stadium is a success in Newham.”