Page last updated at 07:05 GMT, Wednesday, 3 December 2008

Has Crossrail hit a delay?

By Will Smale
Business reporter, BBC News

Artist impression of Crossrail train
Crossrail is due to be begin service in 2017

When the £15.9bn Crossrail project got parliamentary approval in July, it appeared to be full-speed ahead for the new railway running across London from west to east.

But five months later the final funding package for the UK's largest transport project since the Channel Tunnel still has not been signed off.

Industry observers say it seems efforts to finalise the funding have stalled, and unless the money is secured soon the start of major construction work - planned for 2010 - may have to be delayed.

"There seems to be a lot of doubt about the precise funding and the readiness to actually push the button," says rail industry expert Christian Wolmar.

Raising finance for such large projects is never easy. These days, with the financial crisis having spread across the world since September, even governments are finding it hard to raise money.

Funding for Crossrail is secure and we are confident it will be financed and delivered, on time and on budget
Transport for London spokesman

Yet the Department for Transport (DfT) appears confident, insisting it "is working closely with all parties and expects that its funding agreements to be concluded shortly", though they were unable to be more specific about when that might be.

Mr Wolmar acknowledges that "we could still get a go-ahead announcement fairly soon", though he is also convinced that there are "big, big battles going on behind the scenes over the funding package".

Major tunnelling

First proposed way back in 1989, the 74-mile Crossrail scheme will directly connect Berkshire and Heathrow Airport in the west of London, to Essex and Greenwich in the east.

See details of Crossrail route through central London

In the middle will be the expensive bit - the creation of a new underground railway line through central London, with five new subterranean stations that connect to existing tube stops.

With the first trains scheduled to start running from 2017, it will, for the first time, allow direct rail travel between the City of London financial district and Heathrow.

Which is why City-firms had been expected to chip in, though with the current crisis in the financial sector this now looks less certain, observes Roger Ford of Modern Railways magazine.

"Obviously it must be proving very difficult to secure the funding package," he says.

"It is very heavily dependent upon the City making major contributions, and you'd have to ask whether there is now a big shortfall.

"I can see development work for Crossrail continuing, but the real funding for the start of major work does still look uncertain."

'Financial pressures'

In simple terms, almost half the £15.9bn funding, or £7.7bn, is supposed to come from Transport for London (TfL).

Of the remaining total cost, the DfT is supposed to put in £5.6bn (including a £230m contribution already pledged by Heathrow's owner BAA); and £2.5bn from other sources, including Network Rail, the company that owns and runs the UK's railways infrastructure.

A spokesman for TfL says that "funding for Crossrail is secure and we are confident it will be financed and delivered, on time and on budget".

"We are making good progress with the agreements that underpin the funding and governance of Crossrail and expect these to be concluded shortly," he added.

However, while TfL also insists that everything is on track, rail analysts are questioning whether its ultimate boss - London mayor Boris Johnson - has the enthusiasm to raise £7.7bn in the current economic climate.

To run from Maidenhead and Heathrow in the west to Shenfield and Abbey Wood in the east
Tunnel between Paddington and Isle of Dogs
Links to existing tube stations including, Bond Street, Tottenham Court Road and Farringdon
24 trains per hour in peak time in each direction

Especially as £3.5bn is set to come from increased business taxes on all firms in London, many of whom are now worrying about their own cash flows.

The mayor of London's office declined to comment, saying Crossrail was a matter for TfL.

Summarising the situation, Philip Haigh, business editor of Rail Magazine, says he "wouldn't be surprised if a delay was announced".

"The funding from the business community is in doubt, as well as the government's wider financial pressures," he says.

Holding out?

While Crossrail is currently a 50/50 joint venture between DfT and TfL, it will ultimately become solely owned by Transport for London.

This means that TfL - and therefore London taxpayers - may have to take on the financial risk if, for example, Crossrail goes over budget.

Mr Wolmar says Mr Johnson may now be holding out until he gets more funds for Crossrail from the government.

"Boris has said all along that he supports Crossrail, so it would be difficult for him to change his mind on this," he says.

"What Boris may now be saying to the government is 'you haven't given me enough money to do this'. That seems to be at the heart of the delay, and it will be interesting to see how it is resolved.

"I think further delay in the short term seems inevitable."

Crossrail route

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