Funding for the 2012 athletes鈥� village will come entirely from the public purse after the government rejected a 拢375m private sector deal with Lend Lease

The Department for Culture, Media and Sport said on Wednesday that it would invest a further 拢324m from its contingency fund and cash savings, which it expects to recoup when the flats are sold after the Games.

Lend Lease and its banking consortium had offered 拢150m in equity and 拢225m in bank debt, but the deal was rejected owing to the risks associated with private funding.

Tessa Jowell, the Olympics minister, said: 鈥淏ecause of the credit crunch a private sector deal was not a good deal. By funding the entire project the village will become publicly owned and the public purse will receive substantial returns from sales.鈥�

She said other sources of private investment could be sought in the medium to long term.

Lend Lease will continue as construction and development manager of the village.

Dan Labbad, chief executive of Lend Lease Europe, said the company鈥檚 offer 鈥渟till stands鈥� but added that it would be looking for other opportunities in the area. He said: 鈥淲e didn't come to Stratford just for the village 鈥� we wanted to make a commitment to east London. Now we are free to look at other things.鈥�

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