Consortiums endure yet more frustration and expense as deal closure is postponed until Christmas – or beyond.
Contractors working on the Tube public-private partnership must be nearing the end of their tethers. News this week that the PPP deal may be delayed until January will mean further expense for the consortium members, which expected the deal to be closed in June.

A source at Tube consortium Metronet says that the latest delay on the £16 billion project is being caused by a 60-day appeal period that followed the European Commission's clearance of the project at the start of this month.

The insider says that banks are afraid that Ken Livingstone's Transport for London will seek a judicial review during the appeal period and so will not agree to lend the Tube consortium money until the 60 days are up.

The banks are worried because TfL has already twice attempted to halt the deal by legal action. Terry Morgan, chief executive of the other consortium Tube Lines, also says that TfL complaints have delayed the European Commission's investigation into the compatibility of the PPP with EU state aid rules.

The banks' caution means that the deal won't be ready to be signed by December. By this time, the source reckons, the markets will be virtually closed and the deal will probably slip until January. Tube Lines, which says it has financial backing in place, said it expected to close the deal by Christmas.

The delay is expensive to both taxpayers and consortium firms. Every month of delay will cost the taxpayer an extra £36m. Tube Lines, which will take over the Jubilee, Northern and Piccadilly Lines, says that the delay up until November alone will cost it £18m. Metronet won't disclose its costs but they are thought to be in a similar region.

An extra two-month delay will put further financial pressure on consortium members such as Atkins and Amey, whose balance sheets have been hit by delays in PFI deals.

Cash-strapped Amey is desperate to recover its bid costs. It is one-third shareholder in Tube Lines and the consortium says it is looking to recover £109m of bid costs. Nearly half of that amount will be awarded when the deal is complete and the remainder will be reimbursed over the first seven years of the PPP project.

For Amey, costs are mounting because they have been employing 60 or 70 Tube Lines engineers and project managers since spring last year. Lawyer fees have also soared, according to Amey's chief executive Brian Staples. As it stands, these lawyers are pretty much the only ones benefiting from the Tube PPP.