£16bn link may be delayed by fall in land prices and failure to meet funding deadlines

The falling property market may have knocked a £400m hole in the finances of Crossrail, the £16bn rail project to link east and west London.

Last year, Crossrail and the government agreed that £800m for the scheme would come from developers and the sale of land and property belonging to Crossrail partner Transport for London (TfL). Much of this was to have come from the redevelopment the Astoria club on Tottenham Court Road.

However, Steven Norris, the former Tory transport minister, who is on the board of TfL, said the downturn could mean that that element of the funding for the scheme could be £300-400m lower than expected.

Norris said: “Clearly there’s still a question about funding, particularly the part dependent on property values of both surplus property and the developed Astoria. It’s a big hole.

“It gives the Treasury half a chance to delay the projects. The question remains whether we’ll get a spade in the ground.”

The news came as Crossrail failed to meet deadlines for signing funding agreements this week, and amid increasing concerns that the project’s 2010 start date would be delayed.

Crossrail and the Department for Transport agreed last year that all funders should have signed finance and project documents by September this year “at the latest”, but BAA and the City of London Corporation, which are together contributing £600m, said they had not signed agreements. Cross London Rail, the public sector developer behind the scheme, said it was “in the process of securing approval from the relevant boards to the key agreements”.

There are also questions over whether TfL will be able to borrow the £2.7bn contingency package it needs. This was to have been secured on future fares. There is also doubt about whether the Greater London Authority will be able to meet its goal of raising £200m from a cross-London planning charge.

In addition, the government is yet to pass the legislation needed to allow £3.5bn to be collected by a levy on London businesses.

Sir Peter Hall, professor of planning at the Bartlett School of University College London, said: “It’s clear this thing was stitched together rather desperately.“