Wembley reject criticism of stadium's rising costs

After the anti-climax of the limp England defeat against Germany, damp fireworks and Kevin Keegan's hang-dog walkout, Wembley has finally closed, after a charity function, last Thursday, for the NSPCC - dubbed the "bulldozers' ball". The bulldozers, though, are not in yet. Also last Thursday, Chase Manhattan, the bank which has to raise £485m in loans to finance the new Wembley's construction costs, held its first meeting with other banks - at Chelsea Village, the club home of Wembley's chairman, Ken Bates. A Chase spokesman said yesterday they were "very encouraged" by the response and hope to secure funding within five or six weeks.

After the anti-climax of the limp England defeat against Germany, damp fireworks and Kevin Keegan's hang-dog walkout, Wembley has finally closed, after a charity function, last Thursday, for the NSPCC - dubbed the "bulldozers' ball". The bulldozers, though, are not in yet. Also last Thursday, Chase Manhattan, the bank which has to raise £485m in loans to finance the new Wembley's construction costs, held its first meeting with other banks - at Chelsea Village, the club home of Wembley's chairman, Ken Bates. A Chase spokesman said yesterday they were "very encouraged" by the response and hope to secure funding within five or six weeks.

The projected costs, which have mushroomed from £240m in 1997 to the current total £660m, have surrounded the project in further criticism, following an already turbulent history. One insider this week called it "football's biggest headache." But Wembley National Stadium Limited, the Football Association subsidiary, chaired by Bates, which now owns Wembley, say this is standard British scepticism, and are confident of producing one of the world's best stadiums.

Following a controversial tendering process, the contract to build Wembley - fixed at £326.5m - has been awarded to an Australian company, Multiplex, which built Sydney's Olympic Stadium but which came to Britain only in July 1999 and whose only other British job is the West Stand and leisure centre at Chelsea Village.

The £660m includes a £120m Lottery grant, which was spent on buying Wembley from its former owners, after sports authorities rejected all other cities except London and failed to find an alternative site in the capital. The FA itself is guaranteeing £80m against earnings from corporate and "club" facilities, and will also have to repay £20m to the Lottery if, as agreed with the Government following the political row last year, the new stadium does not host athletics. The other costs include £60m interest which will have "rolled up" before the first ball is kicked in 2004, pre-opening running costs, and improvement works around the ground.

Observers have compared the cost unfavourably to other stadiums - Stadium Australia at £255m, Paris's Stade de France at £238m, and English club stadiums, such as Sunderland's Stadium of Light, built for £30m. Arsenal announced a new stadium this week, with 60,000 seats to cost £100m. Wembley's additional cost is partly due to the project including commercial facilities - a hotel, office block, 2,000-seat banqueting centre and a visitor attraction.

Wembley's spokesman, Chris Palmer, rejects criticism, that Wembley is expensive and points out the increased costs are also due to expanded capacity - from 80,000 to 90,000 - and superior quality, and that the income projections are based only on "conservative" increases from now. "We're building a stadium we believe will be the best in the world. It may look a lot of money, but it is being built at a very competitive price indeed."

Interest on the City loan - likely to be around £39m a year - looks onerous. The Lottery grant caps ordinary ticket price increases to the rate of inflation, and a maximum number of corporate and club seats - 12,500 out of the 90,000 total. Yet this, including 150 boxes, 4,000 corporate seats and 6,500 "premium" seats, will be responsible for around 40 per cent of Wembley's planned income. The commercial facilities are planned to earn around 10 per cent.

A Chase Manhattan spokesman, John Anderson, said yesterday that the plan was sound: "We would not be taking it on, or taking it to other banks, if we did not think so, and we are very encouraged already by the response we've had."

Wembley's plan and personality owe much to Bates, whose Stamford Bridge hotel-to-health-club football empire is being financed with a £75m City loan. Chelsea produced their annual report last week, announcing a £3.5m loss, despite having earned over £12m from the Champions' League. Debts have risen to around £140m. Bates said the strategy "has been consistent, a dash for growth, sacrificing profits in the short term". Chelsea's chief executive, Michael Russell, said: "We are generating substantial cash already. When the development is complete, we expect to begin to make profits."

Multiplex are completing the West Stand and leisure centre at Chelsea for a maximum £40m. The company brought a long track record here from Australia. Their executives initially stayed at the Chelsea Village Hotel, and the company offices were initially based on Chelsea Village's third floor.

They won the Chelsea work, says Russell, because they were prepared to work to a guaranteed maximum price of £40m. As a result, Chelsea did not put the work out to tender. It is, says Russell, running ahead of time and budget.

Originally, Multiplex mounted a joint bid for the Wembley work with Bovis, an established British contractor based in Harrow. They are understood to have tendered a price of £349m, at the end of August this year. On 1 September, Wembley announced it had called off negotiations with the joint venture on 30 August, the day before the bid had gone in - a great surprise to Bovis. Less than a fortnight later, on 11 September, Wembley announced a deal with Multiplex alone - for £326.5m.

Nobody from Multiplex was available to talk this week, but Wembley's Palmer said no discussions took place with Multiplex before the joint venture with Bovis was rejected. "We had no negotiations before that. Multiplex were clearly the more enthusiastic, they offered a guaranteed maximum, and have a great track record."

Palmer, who said that the work being done at Chelsea was impressive, stressed that Ken Bates had declared an interest and that, although he was involved in negotiations, he did not vote at the meetings which appointed Multiplex.

Bovis, along with much of the British building industry, remain deeply sceptical that the stadium can be built at the price. "It's a difficult site and a long and complex job," a spokesman, Andrew Bond, said. "We did not see how it could be done for less."

Palmer points out that Multiplex, not Wembley, must now bear that risk. Impatient with scepticism over Wembley, which he says will be superb. He said: "Seats will have more leg room - 800mm rather than 760mm - there will be no restricted views, many outlets selling food at good prices, and probably more toilets than any other building in the world. It's going to be a great place for supporters."

Planned as a national stadium, Wembley is already a monument of sorts to the nation, despite the Government having condemned the plan to build a temporary running track and pulled out athletics. There is talk of athletics returning, but for now Wembley rolls on.

davidconn@freeuk.com