Edinburgh tram route to be cut as cost spirals

• Leith Walk has had to endure massive upheaval to make way for the trams Picture: TSPL

Council officials admitted the initial tramline being built from Edinburgh Airport would only run as far as St Andrew Square, just off Princes Street, after spending months trying to work out whether such a move was viable.

But the council and its under-fire tram company are unable to say how much even this scaled-back route will cost after failing to end a dispute with the German construction giant which has the contract to build the network.

Critics of the project last night claimed the situation was a "total mess".

And traders in the city's Leith Walk, which was severely disrupted by tram preparation works but will not now enjoy the benefits of the service, branded the project a "waste of time". The bitter wrangling with Bilfinger Berger, which is expected to end in a costly court battle, also means the council has no idea when the first phase can be completed.

It may be facing a black hole of up to 200 million simply to get the scheme up and running and the scaled-back route is not expected to be profitable for the first three years, leaving the council to rely on income from Lothian Buses to effectively subsidise the tram.

The revelation that the first phase has been scaled back has sparked fury from politicians and businesses in Leith, which has suffered much of the disruption since work started in its docks area in July 2007. The earliest start date for the tram is thought to have slipped back two years to at least 2013.

Efforts to regenerate the city's waterfront had been relying on the opening of the tram while it was also expected to encourage investment in Leith Walk, where shopkeepers are still waiting to see the first tram rails laid down despite massive upheaval on the thoroughfare.

A new report for the council reveals that 380m of the 500m awarded by the Scottish Government for the project has been spent with just 24 per cent of infrastructure work finished.

The city council has pledged a further 100m to get the scheme up and running, but has only 16m of this in place after generating just a fraction of the 45m it expected to bring in from developers.

Meanwhile, council officials have admitted hopes of reaching an amicable solution with the German consortium at the centre of a dispute with the city's tram firm are "unlikely" to be resolved in the near future.

As The Scotsman revealed yesterday, it is now expected to be December at the earliest before the council and Tie decide to pull the plug on the contract with Bilfinger Berger, which officials have accused of "holding the city to ransom" over claims that building a scaled back route to the city centre will cost as much as 700m.

The ongoing dispute has been blamed for the lack of certainty over the cost of delivering the first phase of the scheme. The new council report fails to put a price tag on either the St Andrew Square option or how much it would cost to deliver the planned route to Newhaven. No details are available about how much a legal battle could end up costing or the financial implications of trying to hire a new main contractor.

The report, compiled by city development director Dave Anderson and finance chief Donald McGougan, states: "Incremental delivery would allow the whole of phase one-a to be delivered in stages and over a flexible timescale under the council's control.

"The council could then ensure that the infrastructure being delivered, at any point in time, is matched with available funding. A tram operating from the airport to St Andrew Square would also secure a high proportion of the economic benefits anticipated in the final business case and is capable of being successfully integrated with Lothian Buses' operations."

The report states the full regeneration of the waterfront is not expected to be complete until 2031 due to the economic downturn, with the next five years expected to see a "period of very slow development".

However Malcolm Chisholm, MP for Edinburgh North and Leith, said: "The first phase absolutely has to go to Newhaven. The whole business case of the tram was based on that happening. I would imagine many of my constituents and local businesses will be very annoyed and disappointed if the first phase stopped at St Andrew Square.

"The crucial thing is that work has to continue until the tram goes to Newhaven. The council and Tie need to get this dispute resolved and have to take a much stronger line with Bilfinger Berger."

Although the SNP runs the council in coalition with the Liberal Democrats, the nationalists have been opposed to the trams scheme locally and nationally.

Deputy council leader Steve Cardownie, an SNP councillor, said: "I don't know what the people of Edinburgh are going to make of it. They are only going to get half a tram line for far more than they the original budget.

"When you look at the turmoil that has been caused in Leith and the anguish that shopkeepers have suffered, people are going to be absolutely livid when they hear what is happening now."

SNP Lothians MSP Shirley-Anne Somerville said: "We've been waiting on this report for over three months, hoping that it would provide the answers that would allow the public and politicians to come to a view on how best to fix this mess.

"But virtually nothing new comes out of the report – all it has done is confirmed our worst fears that the tram line will stop at St Andrew Square. All the digging and disruption on Leith Walk and in Leith has been a total waste of time and money.

"The relationship between Tie and the contractors has broken down completely so we can only expect further legal delays and costs".

Gordon Henderson, regional organiser for the East of Scotland at the Federation of Small Businesses, said he believed traders could seek further compensation if the tram lines did not eventually go past their premises on Leith Walk.

He said: "The uncertainty is the frustration because these people are trying to plan their future.

"The existing traders have had years of disruption and now they don't know whether the tram works have stopped permanently or whether they have eventually got some benefit coming in the end.

"On the other hand, there are businesses which planned to open on Leith Walk purely because of the trams scheme and now all their plans could have been a total waste."

Council leader Jenny Dawe said: "This is not just about the tram project – this is about recognising how transport will underpin economic growth in the city over coming years.

"It is vital that we make provision for a future which is more sustainable, environmentally and economically.

"In the difficult circum- stances we face, this report's positive message about the refreshed business case is welcome news."

Councillor Gordon Mackenzie, transport convener for the city council, said: "The contractual situation we are currently facing is hugely frustrating and I, along with everyone else, would like to see a resolution as quickly as possible."