Accountants and financial advisers are not usually the first port of call for advice on regeneration and delivering major projects. But behind most successful projects there will be a business plan prepared by an accountant and, ultimately, the quality of the business plan will determine success or failure, not the quality of the buildings in the project.

Think of Australia and most people have an image of Sydney Opera House. Not because it is a great auditorium, or a financial success, but because it is an iconic building. It is fundamentally a focal point and symbol for Sydney, generating huge tourist spend.

The holy grail for those involved in regeneration, accountants or otherwise, has been to recreate this iconic status in their own cities. The question is: 'Why do most fail?'

Quite often it comes down to the type of appraisal used to justify the investment. The key difference between a financial appraisal and an economic appraisal is that the latter takes into account cash flows that are not captured by the owner or operator of a facility. For instance, for the opera house you could look at the impact on the economy of visitors staying in hotels. It has become the vogue for many projects to be justified on the basis of economic assessments.

What is often forgotten in this rush to justify a project is that the project will need to have a cash flow to support itself in the long term and this often means significant public sector support.

Let's look at two high-profile projects in the UK, both of which claim to have significant regeneration aspects – the Millennium Dome and Wembley Stadium.

The redevelopment of Wembley Stadium had to start from a fundamentally different position to the Dome. Although Wembley received lottery funding like the Dome, it was clear that the lottery funding would be less than 20% of the overall funding required. The balance would have to come largely from commercial loans.

An investing bank would have no interest in the economic case; the primary concern for a bank would be the ability of the project to repay the debt. The government would not underwrite the repayment and therefore the funding case would have to be supported by a sound, commercially based business case.

The Wembley business case had to be driven by a commercial funder's requirements, which means profits and cash flow. To be profitable, the stadium would have to match the market demand in terms of quality, price and volumes and this would have to be reflected in the building’s design. This was fundamental to the project and the building had to reflect the business case. Contrast this with the Dome, which evolved without a supporting business case.

Accountants are familiar with economic assessments and understand they have their use, but it is becoming increasingly clear that revenue-generating projects justified on an economic basis will fail in the long term without a solid supporting business case.

Politicians who promote projects on an economic basis have short memories and will often drive down operating subsidies over time, leading to a decline in the facility and its appeal. Run-down, poorly maintained facilities are common sights in many cities, often blighting areas and having the opposite impact to that intended.

On many Lottery-based projects there is a common pattern of problems – poor business plans with no real financial underwriting, leading to a lack of financial resilience. It is no surprise that many lottery projects have failed and others are struggling. There are, of course, exceptions and some projects, such as the Eden Project, have, in their own way, achieved iconic status.

Legacy of the dome

The genesis of the Millennium Dome was an objective set in the early 1990s by the Millennium Commission and supported by government to celebrate the millennium. The ambition was backed by a budget, but little else was clear at the early stage. Through the involvement of advisers and the great and the good, the concept evolved and a competition was held from which the Dome emerged.

Although legacy and after use were part of the consideration these issues quickly moved down the agenda with the focus on a one-year event. The aim was to create an iconic building, but it was clear to many it would struggle to find a long-term use.

During the evolution of the Dome, the budget increased several fold with the justification focused on visitor numbers and the economic case. The Dome, in reality, was a project without an adequate business plan.

Bob Stubbs is head of regeneration at RSM Robson Rhodes and former chief executive of Wembley National Stadium