The rise and fall of the O2 Arena formerly known as the Millennium Dome

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How the value of the Dome began to sink!To the vast array of the U.K.’s taxpaying public the O2 Arena will always be known as the Millennium Dome, something which turned out to be one of the largest “white elephants” ever seen in the UK. After a number of attempts to sell on the O2 Arena in recent times, it appears as though Norwich-based property millionaire Ardeshir Naghshineh may be about to grab the deal of the century. So what did the Millennium Dome cost to build and what is it likely to fetch in these very difficult times?

The idea of the Millennium Dome

The original idea for the Millennium Dome was suggested by John Major’s Conservative government prior to the installation of the Labour administration in 1997. Once Tony Blair gained office he very quickly set about expanding the size and scope of the Millennium Dome project which was built as “a triumph of confidence over cynicism, baldness of blandness, excellence over mediocrity” however it has turned out to be anything but the above.

As the project began to unfold it became clear from a very early stage that while costs continued to spiral and the public backlash continued to build there was no way that Tony Blair and the Labour government were going to carry out a U-turn regarding the project. The newspapers were full of spin from the Labour government with a whole host of suggestions as to how the property would be used after the millennium exhibition ended but unfortunately in the end it became something of a millstone around the neck of Tony Blair’s government.

While the project was instigated to celebrate the turn of the millennium the main attraction was the millennium exhibition which ran from 1 January 2000 to 31 December 2000 and was expected to bring in millions upon millions of UK visitors and tourists from around the world. So what went wrong?

The cost of the millennium Dome

Even from day one many critics had been suggesting that the cost of the Millennium Dome would be far higher than the original £399 million and would fall well short on ticket sales to cover any potential excess requirement. The UK government set up the Millennium Commission with the sole purpose of bringing together various funding for the project which was heavily subsidised by the Lottery Fund – without canvassing the opinion of any National Lottery players.

While the project was ready for its big day on New Year’s Eve 2000 it was reported that the total cost of the project when it was liquidated in 2002 was a colossal £789 million. To make matters worse it was also confirmed that £628 million of funding was taken from the National Lottery and with £189 million coming from ticket sales. The excessive funding from the National Lottery was around £200 million more than had originally been expected due in the main to very poor ticket sales.

Expectations for the project

There is no doubt that the Millennium Dome, since renamed the O2 Arena, was a battle of wits between the UK government and various consumer groups who from day one believed that the project was ill founded and a complete waste of money. While Tony Blair managed to open the Millennium Dome on time it came in well ahead of costs and with very few ideas about how to use the structure after 31 December 2000 when the millennium exhibition ended.

It is also worth noting that initial ticket sale forecasts of 12 million for the 12 month period when it was open were well wide of the mark with just over 6 million actually visiting the site for the exhibition. This caused a serious shortfall in funding which as we touched on above was picked up by the National Lottery fund. What became of the Millennium Dome after the exhibition ended?

The aftermath of the millennium exhibition

As it became apparent that the government would have serious problems selling on the Millennium Dome after the exhibition it was disclosed that while the dome was left to rot for sometime after the event closed it was still costing taxpayers in excess of £1 million per month to maintain. Many of the exhibitions were destroyed by their sponsors or auctioned off although funds raised were minimal and the UK public was left with a very expensive “white elephant”.

While initially there had been suggestions that the Millennium Dome would be razed to the ground these were quickly discounted with suggestions of a high-tech business park, entertainment facility, sports centre and other similar ideas. In December 2001 the company Meridian Delta Ltd was chosen by the government to develop what remained of the dome with American billionaire Philip Anschutz effectively taking control of the project and the surrounding buildings.

Perhaps the only piece of good news came in May 2005 when Meridian Delta Ltd managed to sell the naming rights to O2 for £6 million a year. This prompted a serious restructuring of the project, and while the distinctive Millennium Dome roof and its 12 surrounding supports are still very visible, this is all that is now left of the original Millennium Dome.

The O2 Arena (formerly the Millennium Dome) 2009

The financial press is currently awash with stories about the forthcoming sale of the Millennium Dome to the Norwich-based millionaire Ardeshir Naghshineh for something in the region of £35 million. Meridian Delta Dome Ltd is now looking to sell not only the 99 year lease on the O2 Arena but the freehold to the arena itself and surrounding area. It is suggested that the maximum rent available from the arena is around £1.6 million and while many people believe this is a very interesting prospect, the current economic climate would appear to have curtailed what could have been a significant number of parties interested in acquiring the property.

Conclusion

The total cost to the UK taxpayer is probably well in excess of £1 billion when everything is taken into account for a development which looks like being sold for around £35 million. If ever there is an example of over exuberance and over expenditure on any property around the world then the O2 Arena (formerly the Millennium Dome) has to be the ultimate “white elephant”.  It perfectly highlights the fact that while some government initiatives may work there are very few ventures into the private sector which have been worthwhile from the point of view of taxpayers, profitability and overall value for money.

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