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Last Updated: Monday, 17 September 2007, 12:41 GMT 13:41 UK
Q&A: Metronet collapse
Metronet staff at work on London Underground
Metronet went into administration after a 2bn overspend
London Underground maintenance firm Metronet has gone into administration after running into serious financial difficulty.

The collapse prompted rail unions to strike over fears about job losses and pensions.

It has also raised questions about the viability of public-private partnerships (PPP).

The BBC News website looks at the key questions behind the collapse and its consequences.

Who are Metronet?

Metronet is a consortium of shareholders Atkins, Balfour Beatty, Bombardier, Thames Water and Seeboard and has a staff of about 5,000 people.

It was set up to bid for the Public-Private Partnership (PPP) contracts for the renewal of the London Underground (LU).

What does Metronet do?

In April 2003, Metronet took control of two-thirds of the Tube's infrastructure and is responsible for maintaining and improving nine lines, including 150 stations.

It had promised to spend 17bn improving the ageing network during its 30-year PPP contract.

Another consortium, Tube Lines, has responsibility for the Jubilee, Northern and Piccadilly lines.

Overall control of the Tube remains in public hands, through Transport for London (TfL), which is controlled by London's mayor.

What is a PPP?

A PPP is supposed to transfer the financial risk of designing, providing and running public sector assets or services to private companies.

About 70m a month of taxpayers' money is paid to Metronet. The rest of the money comes from Metronet's shareholders and its banks.

Payments can be increased or whittled down according to whether it meets performance targets.

Why did Metronet collapse?

In June 2007, the firm said it estimated there would be a 2bn overspend by 2010.

It said some of the blame did lie with LU for forcing it to do work it was not originally contracted to do.

LU said the overspend was due to Metronet's inefficiencies and so it should foot the bill.

Metronet applied for an extra 550m to pay for budget over-runs, but the PPP arbiter Chris Bolt was highly critical of the company and granted them only 121m.

His draft decision in July triggered Metronet's slide into administration. The arbiter has final say on the matter.

What is the administrator's role?

Ernst & Young was appointed PPP administrators, taking over the running of the business in an effort to put its finances in order.

The aim is to transfer the business to a new owner by early 2008, while ensuring the safe operation of Tube infrastructure.

TfL have formally expressed an interest in bidding for Metronet.

How have Tube Lines been doing?

The problem for Metronet is that the other PPP company, Tube Lines, appears to be making ends meet.

Some experts believe the difference between the two is down to the way they operate.

Tube Lines subcontracts the work on tracks, trains and stations whereas Metronet keep the work within the consortium and it may be that their costs are simply too high.

What was the impact of Metronet's collapse?

Three unions, Rail Maritime and Transport (RMT), Transport Salaried Staffs' Association (TSSA) and Unite, sought reassurances on jobs and pensions covering the period of administration.

TSSA and Unite were satisfied with assurances received but the RMT said it was not and planned a series of three-day strikes in September.

What was the outcome of the talks with the RMT?

The first of the three-day strikes was held on 3 September. It was suspended after 24 hours, following talks between the union and Metronet, its administrators and TfL.

TfL, which runs the LU's pension scheme, assured RMT bosses that staff pensions were secure.

Meanwhile, Ernst & Young told RMT there would be no job losses or job transfers to the consortium's different firms during the period of administration.

TfL said the talks had not resulted in any new agreement and the RMT were offered the same assurances as those offered to the other unions.

Prime Minister Gordon Brown described the walkout, which caused massive disruption, as "wholly unjustifiable".

Metronet calls in administrators
18 Jul 07 |  Business

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