When in a hole…

When future historians turn their attention to the engineering landmarks of the late 20th century, the Channel Tunnel will surely merit a page of its own.

A dream since Victorian times, the physical link between two of Europe’s major nations beneath the water of the English Channel was declared a triumph when it was opened in 1994.

However, while chroniclers of engineering and Anglo-French relations will look back on the Channel Tunnel project with fondness, economic historians (they do exist) are likely to paint a less rosy picture.

This week brings the latest attempt to restructure the finances of Eurotunnel, the Channel Tunnel’s operating company, and sort out the £6bn debt mountain that has seen it teeter on the brink of corporate meltdown for as long as anyone can remember.

Eurotunnel’s management has labelled the complex refinancing arrangements as the last chance to stave off that long-predicted collapse and save the tunnel from liquidation.

How on earth did such a patently useful piece of engineering as the Channel Tunnel get into such a pickle? The answer is that even as its engineers put the finishing touches to the tunnel, it was doomed as a business, at least on the terms its founding investors envisaged.

The tunnel cost £10bn to build, and from the word go servicing its debts became a millstone around the project’s neck heavy enough to sink a cross-channel ferry.

Indeed, those ferries were major contributors to its problems. The tunnel’s original management confidently expected the ferry operators to chug their way into oblivion, but instead they fought tooth and nail to hang onto passengers with a business acumen that eluded their new subterranean competitor.

Eurotunnel has simply never made enough money to cover what it cost to build. Margaret Thatcher famously boasted that the project had been completed with not one penny of UK taxpayers money.

There is a lot to be said for keeping public money away from major projects (a used Millennium Dome anyone?) but some, like the Channel Tunnel, are just so huge and so critical that they defy commercial gravity.

In fact if Eurotunnel does go under, so to speak, then under the terms of its original licence the tunnel would revert to the UK and French governments. What a roundabout way to get a free engineering marvel that would be.

Andrew Lee

Editor