The cash crisis hitting the 2012 London Olympics project and tougher market conditions could spark crippling disputes in the construction sector, warns one major law firm.
Mace & Jones' dispute resolution and construction specialist Charles Tomlinson sounded the warning as the chancellor Alistair Darling authorized a £461m bail out of two major aspects of the Olympics project.

The money will be used to shore up funding for the £1bn Olympic village and £400m media centre. The government had counted on receiving much more private sector investment in the Olympics.

Tomlinson said great care must be taken by firms with Olympic construction contracts.

'When London was awarded the Olympics the construction sector was booming,' he said. 'It was a welcome bonus for the sector. Now it will be seen as vital for the survival of many companies at time of unprecedented crisis in the sector. With margins going through the floor and the commercial sector in freefall, all parties will be looking to protect their positions. This is not the ideal environment for a project of the scale and importance of the Olympics'.

Tomlinson urged all parties to collaborate and deal with issues at an early stage to preserve relationships.

He said: 'If, or example, you are waiting payment, does the other party have the means to pay? If so, a well timed adjudication can protect cash flow. In relation to more complex disputes, parties must consider alternative forms of dispute resolution such as mediation, expert determination or just good old fashioned commercial negotiation to keep the project alive'. He added 'The financial health of all participants is crucial to the success of the Olympics.'