London’s Tube Renovations hit the Buffers!

The contractor charged with updating London’s underground railway system has announced that it is going into administration. Metronet has accumulated a massive overspend on the project of more than two billion pounds.

Ken Livingstone, London’s Mayor has been approached by the company to appoint someone to act as administrator. This job is likely to go to Ernst and Young and will probably end up on the desk of Mr. Alan Bloom who specialises in insolvencies. Mr. Bloom was the expert responsible for the administration of Railtrack and he is expected to be appointed to this new job at the High Court later today.

Metronet has made a statement in which it claims that the two contracts under a Public Private Partnership umbrella were not viable. To renovate and fully maintain the underground railway in the capital is a huge and very expensive project. The programme for the restoration of the Bakerloo, Victoria and Central line networks was underfunded by some £1bn pounds Metronet claimed. The creditors and shareholders’ involved with the company had refused to come up with any more credit or additional funding. Atkins, Balfour Beatty, EDF, Bombardier and Thames Water, the main players, look set to lose substantially.

The project simply cannot go ahead without further funding and this was not available to Metronet so the company had no option but to call in the administrators.

The contract for London’s sub surface lines run by Metronet SSL also has an overspend amounting to £1bn. The request for emergency funding to keep that project alive was also refused.