Believing that the creation of a National Lottery in 1994 would result in multiple applications from English cities seeking funding for the construction of major new sports stadiums, the Sports Council for Great Britain, later Sport England, established a national stadium competition with the objective of developing a central stadium for three sports - football, rugby league and athletics. The winning project would be financed by a combination of lottery grants and private funding with any profits generated by the new stadium benefiting national sport.
Wembley Stadium was selected in December 1996 as the preferred site for the new national stadium and in November 1998 the project was awarded £120m Lottery grants through Sport England. The British Olympic Association was concerned that the proposed designs of the new National Stadium would not meet the technical requirements for athletics events for a future Olympic Games (it had been developing the idea of London bidding for the Games since 1995). However by December 1999 Wembley National Stadium Ltd, the development company which was a wholly owned subsidiary of the Football Association, could not raise the required commercial funding. Faced with the prospect of being unable to recover the full amount of the Lottery grant Sport England accepted the FA's proposal for a modification of the original agreements - removal of the athletics facilities in return for repaying just £20m of the original Lottery grant.
As Wembley National Stadium would now no longer house athletics facilities, a search for an alternative national athletics venue got underway. Twickenham was first suggested (see: BOA/ADM/5/6/1 & BOA/PAR/6/1) however Sport England approached Lee Valley Regional Park Authority to submit a proposal for Picketts Lock, North East London. In all eight different venues were considered but at a meeting chaired by the Secretary of State on 24 March 2000, Picketts Lock was selected as the preferred option, despite Sport England highlighting potential problems with the site.
UK Athletics won the bid to host the 2005 World Athletics Championships provided that the promised Picketts Lock development went ahead, however the project soon ran into difficulties. The Mayor of London refused to act as guarantor for the costs of the 2005 WAC and no other underwriter was established; third party funding could not be found for the capital shortfall for the development of the site - a required element for the Lottery grant which the new stadium was dependent on.
Lee Valley RPA submitted their formal Lottery application to Sport England for £67m in June 2001. Sport England in a joint meeting with the Lottery Panel again raised its concerns over the transport, legacy and revenue issues it had first voiced in 2000, and subsequently commissioned a review of the Picketts Lock development to see if its concerns could be dealt with easily. Unfortunately the review supported Sport England's misgivings and recommended the 2005 WAC should be moved if the IAAF agreed, if not then the Government should withdraw from the event. On 4 October 2001, the Secretary of State advised UK Athletics of the decision to cancel the Picketts Lock development. UK Athletics agreed to offer Sheffield as an alternative venue to the IAAF, however this was rejected and the bidding process reopened. The 2005 WAC was awarded to Helsinki.