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Olympic venues to blow budget by £106m

The estimated cost of the main Olympic stadium has now hit £525 million, Boris Johnson's Olympics watchdog revealed today.

It is a £29 million increase since November and part of an estimated £106 million increase in venue costs for the London 2012 Games over the same period.

The figures form part of business tycoon David Ross's high-level review of London's preparations for the Games commissioned by the new London Mayor.

Mr Ross, the millionaire founder of the Carphone Warehouse, carried out a three-week review in light of the current global economic downturn. He was chosen by the new London Mayor to keep an eye on the Olympic purse strings and sits on the London Olympic organising committee board as Mr Johnson's nominee.

He identified questions over the security of the 2012 Games, its legacy and the Olympic Village as key areas which need to be "focused on", he said.

In the report, Mr Ross notes: "The extent of cost pressures affecting the venues can be seen in the £106 million increase in the anticipated final cost of the venues since November 2007.

"As an example, the Olympic Delivery Authority’S current estimate of final cost for the stadium contract has risen from £496 million in November to £525 million."

He notes that the rise in the venue budget has been offset by savings elsewhere meaning there "has only been a very small increase in the overall anticipated final cost of the total programme of £16 million."

The report said: "Containing cost pressures and avoiding further calls on the contingency will be difficult and require sustained effort to manage contractors effectively.

"This process must be overseen from the top by the Olympic Board on the basis of the best possible information."

The original venue budgets were not based on detailed designs and assumed there would be "competitive tension" in the market place.

This was not the case with either the showpiece stadium, which will be shrunk from an 80,000-seater venue to a 25,000-seater track-and-field arena after the Games in east London, or with the Aquatics Centre.

The ODA, which has contracts with Sir Robert McAlpine on the stadium and Balfour Beatty on the Aquatics Centres, found itself in a single bidder situation.

The ODA is "realistic about the significant level of risk that remains within these contracts", the report says while noting that the target cost contracts were probably the best deal that could be driven as a fixed price may have been too high.

The ODA has previously said it is confident about the stadium budget announced, stating it contained provision for inflation, VAT and conversion down to legacy. The stadium was originally priced at £280 million in London's bid document in 2005.

The squeeze on the banking system, falling house prices, the rising cost of oil and raw materials and the terror threat will add "significant pressure" to the aspects of Olympic project, Mr Ross predicts.

Mr Johnson, who has been fiercely critical of the mounting Olympic bill, has vowed that Londoners would not be saddled with an "unreasonable bill for generations to come".