The London mayor, Ken Livingstone, admitted today that the company charged with renewing three-quarters of the underground network could collapse, as he announced a significant increase in engineering work on the crowded tube system.
Metronet is struggling to offset a projected £750m cost overspend and could face insolvency if its shareholders refuse to plug the funding gap.
Mr Livingstone said investors - which include Balfour Beatty, WS Atkins and Thames Water - could choose bankruptcy rather than meet the overspend costs: "It is quite possible that the shareholders will opt for insolvency."
If Metronet did go under, London Underground management would intervene to take over maintenance and renewal work, he said.
"We will step in and it will be managed by Tim [O'Toole, managing director of LU]."
Mr Livingstone warned that Londoners face significant disruption over the next year as he unveiled the work programme from this month until April 2008.
Projects include a £509m overhaul of Victoria tube station, one of the busiest hubs on the capital's transport network.
"It means real inconvenience for lots of Londoners," he said. "But it's work that has to be done."
Much of the programme will be carried out by Metronet, which is responsible for engineering work on nine of London's 12 tube lines, including some of the busiest transport arteries such as the Central and District lines.
It has been awarded the work under a 30-year, £17bn private public partnership contract.
Metronet is paid a fee by the mayor's Transport for London authority, which increases if targets are met and is whittled down if work overruns.
One of the main reasons for the cost overspend is delays in completing the station renewal programme, which involves major refurbishment work on 150 stations.
Two of Metronet's five shareholders, construction group Balfour Beatty and engineering consultancy WS Atkins, broke ranks last week to warn of financial difficulties at Metronet.
Balfour said Metronet's finances were "under increasing pressure" because of "the high level of unanticipated costs" and called for an extraordinary review of the PPP deal to determine whether investors must cover the £750m overspend.
Atkins said it had taken a £36m hit against the contract and backed calls for an extraordinary review, which would take a year to complete.
However, Mr O'Toole said in a press conference at City Hall that he expected Metronet's investors to solve the looming funding crisis and avoid a collapse.
"They have announced that the value of their investment is not what they hoped it to be," he said. We expect them to find some way to work through their difficulties. The important thing is that the work does not stop."
publishing date 1st August 2007 - click on the title to order
