Channel Link: Collapse of high-speed rail link scheme spells disaster for transport network

The high-speed Channel Tunnel rail link project effectively collapsed yesterday. Eurostar services could now be handed over to British Rail. Randeep Ramesh looks at the looming threat to Britain's transport network.

The 68-mile Channel Tunnel Rail link is unlikely to be built for a decade unless more public subsidy is injected into the project, according to London & Continental Railways.

Sir Derek Hornby, LCR chairman, said that the Government, which has turned down an offer to put an extra pounds 1.2bn of public money into the project, would not have had to pay out anything until 2002 under the deal he offered.

LCR has 30 days in which to return to the Government with a new set of figures or lose the right to build the link. British Rail would take over Eurostar - which last year lost pounds 180m and will not break even until 2001 - and ministers would look to other consortia to come forward.

If construction does not begin in April as planned, then the new link is unlikely to meet its start date of 2003. The UK has had to watch enviously as its Eurostar partners, France and Belgium, have trains running at 186mph following the completion of their high-speed links.

Railtrack, the company which owns the nation's track and signalling, has had talks with LCR about taking over the project. But because of the size of investment required the company said yesterday that it would need some "assurances" over the outcome of a review of its charges presently being conducted by the rail regulator.

Virgin Group and National Express bus company, both investors in LCR along with bankers SBC Warburg and engineers Ove Arup, have indicated they could join Railtrack in a new company. Another white knight could be Eurorail, the consortia which lost out to LCR in 1994.

Key road and rail schemes are also threatened if the pounds 5bn Channel Tunnel rail link (CTRL) is not completed, including a new station at St Pancras, north London for the pounds 580m Thameslink project and a pounds 168m widening scheme for the M2 in Kent.

Another casualty of the delay is a pounds 150m new station at Stratford, east London which was to be used by Eurostar services to the north. The link from central London would reduce journey times from London to both Paris and Brussels by about 35 minutes. Eurostar trains currently reach Paris in three hours.

About 1,000 staff are employed by LCR. The company said yesterday that the Department of Trade and Industry estimated 80,000 jobs could be created by the project. About pounds 140m has already been spent on the link. Earlier this month two tunnelling contracts, worth a total of pounds 200m, were awarded.

LCR was clearly taken aback by the swift response by John Prescott, the Deputy Prime Minister. Sir Derek said LCR's offer included sharing profitability and revenue with the Government in the latter stages of the project.

Mr Prescott was clearly annoyed that LCR had not met its own projections and was forced to come cap in hand to ministers to bail out the private sector. He told MPs that LCR estimated there would be 9 million passengers this year, while other bidders believed it would be as low as 6 million.

"It was in fact 6 million. They made a wrong judgement about the passenger income and that's why this deal is in real difficulties," said Mr Prescott.