According to a report on the BBC

The 2012 Olympic Games will drain away up to £440m from London’s sport and arts groups, a report shows.
“Both the Cultural Olympiad – a four-year programme of events aimed at increasing participation in cultural activity – and the Government’s Olympic sports participation target – to increase the number of people who are physically active by two million by 2012 – were identified as being heavily dependent on smaller grassroots organisations.
But the report, by the assembly’s economic development, culture, sport and tourism committee, said it was these very organisations that would be hardest hit by the funding diversion”
“…our investigation shows that the on-the-ground opportunities Londoners were promised are at risk because the funding diversion effectively ham-strings the organisations needed to deliver them.”

I’d love to say “London Olympics in ‘bad for arts’ shocker” but of course no-one with any sense is surprised.