The silence of the Dome

For 12 months, it bestrode the national consciousness like a colossal running gag. Then it rather slipped from view. But if you thought the Millennium Dome had stopped haemorrhaging the millions, think again: Year Two has been little better than Year One

It seemed like a reasonable request. On behalf of The Independent, I wanted to tour the Millennium Dome, to see what has happened to the site that consumed so much taxpayers' money and that has now been closed for almost a year. "No, you can't visit," said Jo Whitney, press officer of English Partnerships, the government agency that owns the Dome. "They're levelling the floor at the moment. It's a hard-hat area."

Hang on – weren't countless journalists given hard hats to wear and taken round during its construction? Didn't Lord Falconer, the Government minister in charge of the project, appear to love dressing up in workman's boots, luminous jacket and coloured helmet, to extol the virtues of the mammoth structure and churn out facts and figures galore?

Just a few samples from the old press pack: the Dome can hold 1,459 blue whales; the Dome can contain 175 billion sherbet lemons; it covers an area more than three times that of the Colosseum in Rome; it can contain more than 18,000 double-decker buses; the Central Area is equivalent to four Albert Halls; and 94 African elephants can stand in a straight line across the Dome.

Here are some other, less colourful, Dome details: it cost £794m of public funds to build and operate; the Jubilee Line extension added £3.5bn to the bill; visitor numbers during the exhibition's year of opening were barely more than half the 12 million break-even target; and the New Millennium Experience Company (NMEC), the outfit charged with running the Dome, came within hours of going bust and was only saved by yet another injection of public cash.

Then there's the less well-known, though no less embarrassing, fact that the nightmare didn't stop on 31 December 2000. On the contrary, the cost of mothballing the Dome in the past 11 months now exceeds £21m. Oh, and the Government still cannot find a buyer. And, for good measure, the minister responsible is still Lord Falconer, Tony Blair's close friend.

After being shunted up and down Whitehall corridors, I end up with Ms Whitney again. There is a weariness in her voice. No, as she said before, no journalist can visit. "It's a hard-hat area," she repeats, like a mantra.

But surely it is no more dangerous than it was when the Dome was being built, when dumper trucks were racing round and cables and piping were everywhere, and every newspaper in the land carried pictures of Falconer proudly wearing his hard hat? What has changed?

Ms Whitney gets technical: what she terms "a hard strip" is taking place. As part of the "decommissioning" process – Ms Whitney and her Whitehall colleagues seem to love this word – the remaining contents are being removed.

It is far too dangerous for visitors. What about the sale; how is that going? "I can't comment on the disposal process, you will have to speak to the department about that."

There is no choice, then, but to pay my own visit to the Dome.

Surprisingly about 50 people alight from the Jubilee Line train in the cavernous North Greenwich station that serves the complex. But my fellow travellers head off in the other direction, to catch buses for nearby south-east London housing estates, leaving just me to pass through the ticket barrier on the Dome side of the station.

Above ground, there is not a soul in sight. Gone are all the bright yellow hoardings, the posters promising "One Amazing Day". Ahead, the Dome sits, brooding, emitting a faint glow. All the cafés and camera kiosks are shuttered. A security guard appears and asks visitors what they are doing. They are directed towards the entrance inside some temporary cabins. Notices on the wall announce that all bags, of anyone entering and leaving, will be searched; while a large sign proclaims: "Use of private cameras on this site is strictly prohibited." This in what, for a year, was just about the most photographed structure in the world.

As music from a radio blares in the background, I tell the lone gatekeeper that I'd like to see Gez Sagar, the one surviving press officer for the NMEC. He knows who Sagar is and has the number of his phone extension, but instead of ringing him, dials something called "Bronze", presumably a code for another security phalanx, for them to contact Gez.

It is cold and dark outside, and the air of abandonment and desolation is palpable. This is how you imagine a dreary installation somewhere in eastern Europe – not an edifice that was billed as "unique", "awesome" and "inspiring" in its publicity; that was a state-of-the-art, hands-on tourist centre; and that, after all, is not yet two years old.

On the counter are some leaflets promoting "One Amazing Day." Why are they there? "For the visitors who still come. They just turn up, so we show them what it was like inside," says the guard.

Sagar arrives. He is apologetic. It's not up to him: he can't show the press inside either. Instead, over a coffee in the empty press centre, which is surrounded by office chairs all bearing sticky labels marking them up for future disposal – the place feels like a small-town furniture auction room – he maps out the history of the project.

The lowest point, he says, came in September 2000, when the NMEC was heading for the wall. Only an emergency injection of £47m of public money and a change in chairman – with the arrival of David James, a renowned "company doctor" – saved the day. But from then on, insists Sagar, the final chapter was positive: "From a position in September 2000, where we were a few hours away from insolvency and leaving bad debts, we kept the Dome open to the end of the year. An extra 2 million people saw it who would not otherwise have seen it."

Since the Dome shut, says Sagar, "the decommissioning process has gone better than expected. It has been closed down in an orderly fashion, which would not have been the case if it had collapsed in September 2000."

This is impossible to check. If the media want to go inside and see for themselves what has happened to all that public money, or if they want to find out how the sale is going, then, says Sagar, there is only one man who can help: Lord Falconer.

But a subsequent phonecall to Lord Falconer's office gets nowhere. Jan Vass, the minister's personal press officer, doubts if the usually talkative peer will give an interview but he will check. Vass is right: Falconer does not want to talk about the Dome. Says Vass: "If he had a story to tell he'd make himself available."

In fact, there is a story that Falconer could tell. It is not, however, one that he is likely to show any great enthusiasm for telling. It is the story of how and why it has taken, to date, nearly three years to sell the Dome; and why, although more than 150 prospective buyers have shown an interest, he has been unable to close a deal with any of them.

It is hard to credit now, but the first prospectus for the sale of the Dome was published in March 1999. Before the giant tent was unveiled to the public, the Government announced its intention to hold a competition to sell it. Which was fair enough: the Dome was only ever going to be open for one year. Ministers were determined it should not turn into a white elephant by the river. Here we are, in December 2001, and it is precisely that.

At first, the sale process went well. Around 80 expressions of interest were received, of which 22 were judged to be serious. By Easter 2000, after lengthy discussions, the list was winnowed down to just one: Nomura, the British arm of the huge Japanese investment bank.

In July 2000, Nomura, with its team headed by Guy Hands (MD of its private equity division), was declared the preferred bidder. In effect, bar unforeseen disaster, the Dome was Nomura's.

Hands' plan was to maintain the Dome pretty much as it was. The exhibition would continue, with the same zones; only the theatrical show would change. A Californian company with experience of working on hi-tech theme parks in Japan and the US, was drafted in to make the place more fun.

Some people would lose their jobs, but most of the Dome's staff would be retained. Nomura was confident that it could make the venture pay. The bank's Dome Europe consortium was prepared to pay £105m up front with a guaranteed further investment of £200m over five years. In addition, the Government was to receive a share of profits, taking the total value of Dome Europe's bid to £350m.

All that was required was for Dome Europe to get access to confidential information and to be satisfied about what the dossier contained. Neither occurred. Incredibly, given the scale of the project and the amount of public money consumed, nobody in a position to know could tell Nomura, which was willing to spend hundreds of millions of pounds, just what the NMEC owned and what it owed. Bankers were shocked at the lack of information available.

"We pulled out because they could not tell us the detail of what we were buying," said a Nomura spokesman. The Dome's owners could not supply prospective purchasers with two vital documents: an assets register, listing everything to be included in the sale; and a contracts register, showing all the supply contracts – in effect, the liabilities the buyer would be inheriting.

"It was like buying a house without an agreement on fixtures and fittings. Also, they couldn't say what liabilities we were taking on, so it was commercial madness for us to proceed," said the Nomura spokesman.

Worse, Nomura maintains that it was misled over visitor receipts. Just how many people went to the Dome was a vital factor in Nomura's bid. Their plan, don't forget, was more or less to carry on with the same exhibition – so how many people bothered to see it was a major concern. Hands's team knew prices were being discounted to boost the numbers – what they did not at first appreciate was just how many. In all, 20 per cent of the 6.5 million visitors who passed through the turnstiles held heavily reduced tickets. The major companies sponsoring the Dome were entitled to give bargain offers to their customers. British Telecom, for instance, launched a £10-a-head promotion. Boots and other companies did something similar.

"We were given a false impression about attendance numbers," said a Nomura executive close to the negotiations. "In July, when we were appointed winners, we were told the Dome was on course for 6 million visitors. In September, we became concerned. We found that the fundamentals had changed overnight, that the numbers we were being given were not for full-price tickets. The whole thing was a mess."

At that point, Nomura withdrew, plunging the sale back to square one. In a letter to Hands, the NMEC's chairman said he was "surprised and disappointed" by the decision. David James wrote that, at meetings, Nomura had been given realistic, full-priced estimates and "you should also note that your team have been informed weekly of actual visitor numbers by e-mail. It is surprising, therefore, that you have only recently identified this as an issue."

James wrote that he felt particularly let down because Nomura had recently requested an improved communication flow, which was being attended to.

Dome insiders try to put a gloss on Nomura's climbdown, claiming that the bank was never serious, that Hands (who is currently just about Britain's most successful deal-maker) was acting on his own, without the say-so of his masters in Japan. "Bullshit," said the Nomura executive quoted earlier. "Guy Hands is an employee of Nomura. He can't do something like this without Nomura's approval. The recommendation to withdraw was Guy's."

Some of the blame for the debacle is levelled by Dome staff at PY Gerbeau, drafted in as chief executive of the NMEC to save its showpiece when it hit the buffers soon after the disastrous opening party on New Year's Eve 1999. "PY was great at enthusing staff but the whole issue of insolvency he did not see coming," said one Dome executive.

Such criticism is unfair. Gerbeau was an excellent salesman and a terrific leader. Responsibility for preparing the books for sale, surely, lay elsewhere, with Falconer and his staff who oversaw the whole thing. "PY should have had better support," acknowledges the Dome official.

Today, Gerbeau believes he was made a victim for the failings of others. Now trying to put the Dome behind him, he has relaunched his career as chief executive of Exscape, a company developing combined leisure and shopping centres. Its first venture, in Milton Keynes, complete with an indoor mini-mountain of artificially created "real" snow, is already well on target to surpass the Dome's visitor tally. But he remains bitter. "The Millennium Commission was the banker. Their agenda was 'We must not lose face, we must try to cover ourselves. And now we have a scapegoat in the Frenchman.' Their agenda was survival."

Gerbeau claims that when it came to his own bid, the Government did not want to know, preferring to talk to others – rather than let him take it over and make it work. That may be so, but it is also the case that Gerbeau struggled to get the necessary level of financial backing for his proposal. Meanwhile, the Government was left with the ever more urgent problem of what to do about the Dome's future.

Nomura's withdrawal set the sale back months. The next preferred bidder in line was Legacy, a consortium headed by Robert Bourne, the property developer. The same rigmarole swung into operation again in September 2000, with Legacy being granted preferred-bidder status.

But Legacy's bid – which has never been formally withdrawn – was doomed once the dot.com bubble burst. Bourne's plan was for a hi-tech business park, employing 20,000 people in small units. Doubts were raised about the viability of the idea, and in February this year the special status was removed, sending the sale, for the second time, back to the drawing-board.

Two years after the process started, the Government was no nearer concluding a sale. Having learnt their lesson of publicly committing to one proposal, only to see it lead nowhere, the Government has since been talking in detail to all the would-be owners. "It's taken so long because the deal is massive," said a Government source. "They are also desperate for it not to be publicly funded. They want it to be viable, and the Dome has to remain standing for 15 years, minimum."

Meanwhile, the bad publicity shows no sign of abating. In November, Grosvenor (the Duke of Westminster's property company) and Stanhope withdrew their bid, prompting Tim Yeo, the shadow culture secretary, to accuse the Government of covering up the true extent of the Dome's continuing problems. Other potential bidders that have withdrawn their interest include BBC Worldwide and the Tussauds Group.

At the same time, occasional embarrassing Dome details continue to drip out. Earlier this month it was reported that the cost of maintaining the empty structure was still running at about £240,000 a month; and that a leading City public relations firm, Cardew & Co, had been paid at least £339,000 to provide "external press support" for the empty Dome. (This is in addition to the NMEC press office headed by Sagar.) In short, the need for the Government to get this spectacular liability off its hands has never been more urgent.

Today, the field of potential buyers is believed to have narrowed to three: Wellcome, which wants to use the Dome for a vast bio-science centre; Meridian Delta, a consortium formed by the Quintain property group which includes Philip Anschutz, owner of the LA Lakers basketball team, and would see the Dome become a sporting, concert venue and the surrounding land developed for housing and shopping; and Tops, a shopping-centre company. Of these, Meridian is regarded as the front-runner.

But while negotiations drag on, Falconer has found a use for the empty white shell. On New Year's Eve, the Dome will play host to a Ministry of Sound night. Some 40,000 people will dance to 50 DJs across the floor of what was built as the educational symbol for Millennium celebrations.

Meanwhile, the property market is foundering, and there is a sense in Whitehall of a government being reluctant to let go, possibly out of embarrassment: no deal will recoup anything like the money spent on it; far better, therefore, to keep the Dome, which at least has been rightly lauded as an architectural marvel. Instead of an outright sale, officials are now speaking of a joint venture and possible rental.

Much is hanging on the success of New Year's Eve. Unlike last year, when the Ministry hired the exterior, clubbers will be inside the Dome this time. It will be the first major event under that yawning roof since it closed. Others may follow – not all of them quite so spectacular. "All sorts of people have been mentioned," said an official. "Farmers' markets, conferences and trade fairs, even the Royal Smithfield Show."

Sell the neighbouring acres for much-needed housing – private and public – and save the Dome as a new indoor Wembley: that seems to be the way it is heading. And, meanwhile, make as little information public as possible. How much, for example, is the Ministry of Sound paying to hire this building that you and I paid for? Is it true, as has been reported, that it will cost them only £5,000? As with so much else about the Dome, official figures are not forthcoming.

Time for one last call to Falconer's office. "It's not going to be possible to speak to him," says Vass. "He's got nothing new to say."

Why has any announcement taken so long? "There is an ongoing process, and I can't go into the details of the negotiations."

Are they nearer a conclusion? "Who knows? There is many a slip betwixt cup and lip."

That, in the context of the Dome, must count as one hell of an understatement.