Construction inflation is expected to run at 6.5% a year until 2012 primarily because massive development in the Middle East and China has led to a relative shortage of supply in building materials. But Jowell warns that costs could rise further still. The current euro 4.9-billion ($6.3-billion) cost does not include regeneration. The land set aside for the development is heavily contaminated and government advisers put increased costs of disposing toxic waste at euro 118.5 million ($152.6 million).

Neither does it include the cost of VAT on materials and completed buildings. The Treasury has not yet decided whether or not to waive this bill, which could cost anywhere between euro 370 million ($477 million) and euro 1.5 billion ($1.9 billion).

Despite the rising costs, London Mayor Ken Livingstone remains optimistic. "I will make a prediction to you now," he states. "These games will make a profit. We have taken the most rundown and polluted place in southern England. On the back of the games, we're going to regenerate it. It will be a vibrant new area."