Crunch bites more holes in major projects

Difficulties in raising finance have severely affected three more major projects.

Building reports that falling property values have opened up a £400m financing gap in the £16bn Crossrail project, while Contract Journal writes that the development team behind the Olympic Media Centre is scaling back its proposals.

Construction News reports that speculative elements in developer Argent’s £2bn King’s Cross project are likely to be considerably cut back.

Crossrail has been hit as its budget includes £800m to be raised from the sale of properties and land belonging to Transport for London.

But Steven Norris, a former Conservative transport minister and TfL board member, told Building that the downturn could wipe £300-400m from the sites’ value.

Norris told the magazine: “It’s a big hole. It gives the Treasury half a chance to delay the projects. The question remains whether we’ll get a spade in the ground.”

Meanwhile, BAA and the City of London Corporation have missed a September deadline to sign off a total of £600m in funding pledged to the Crossrail project. And Building also questioned whether the Treasury would be able to borrow a £2.7bn contingency package secured against future fares.

In Contract Journal, a news report suggests that the £400m media centre to be built by Carillion and developer Igloo faces a redesign in the face of the credit crunch.

Uncertainty surrounds how much of the project will be a permanent structure built for legacy uses, and how much will be made up of temporary buildings.

The original plans were that around one million square feet of space would be used as permanent business space after the Olympics, creating a media and creative hub.

At King’s Cross, Argent construction director Tony Giddings told Construction News: “The credit crunch is badly affecting us. That’s probably the fairest way of putting it. Before these conditions hit you could happily go forward speculatively, but you can’t do that now and financing …has become very difficult.”

The first phase was to have included a £90m, 42 000 sqm office complex that was due to start on site under contractor Carillion in November.

However, Giddings insisted that Argent had contingency plans, and that the affordable housing elements in the King’s Cross scheme would not be affected.