Branson has learnt the lesson of Eurotunnel

LISTEN for a few minutes to Will Whitehorn, the man spearheading Richard Branson's railway ambitions, and it is impossible not to catch his infectious enthusiasm for high-speed rail travel. Whitehorn has a vision for international rail travel and it is a million miles away from my rackety everyday commute.

Sleek trains carrying 800 people a time - two jumbo jets' worth - will whisk people from the regional cities of Britain to Paris, Brussels and points south. Birmingham to Paris will take four hours. London to Paris could eventually come down to two hours.

Mr Whitehorn is already thinking about sleeper services from Scotland. Eventually there could be "specials" to Alpine ski-resorts and Euro Disney. Branson has already talked to Philippe Bourguignon, the theme park chairman, about lengthening the platforms.

Passengers will be wooed with airline-style frequent-flyer promotions and the trains will be segmented into different sections - from luxury for business travellers down to no-frills, budget-style travel to take on the ferries. "There will be a price war," says Mr Whitehorn with glee.

Branson's Virgin is a 17 per cent shareholder in London & Continental Railways, which was last week awarded the pounds 3bn contract to build the rail link from London to the Channel tunnel entrance and to take over the running of the Eurostar passenger train service.

The hideous spectre of Eurotunnel looms over anyone contemplating a transport infrastructure project. The Channel tunnel project has been a spectacular financial disaster. But I reckon Branson and his partners - SBC Warburg, Bechtel, National Express, London Electricity and others - are on to a winner.

First, they are running the show as a transport project, not an infrastructure project. The primary aim is to deliver an attractive service to passengers, not give work to contractors. Mercifully, there are no construction companies in the consortium. Contractors have next to no say in this project and are clobbered with penalties if they misbehave.

Second, they have Bechtel as a consortium member. The American project management group has unequalled reputation for bringing projects in on time and to budget. When the Channel tunnel got into a mess in 1990, Bechtel was brought in to sort things out.

Third, there is some income from the start. LCR has a share of the revenues from Eurostar. With Virgin's flair for marketing, you can expect demand for the service to grow by leaps. Eurostar for the moment is still little known.

Fourth, high-speed train travel is undeniably preferable to planes for shortish journeys. In Spain, the Ave, a three-hour high-speed train from Madrid to Seville, has flattened demand for flights since it was opened in 1992. Iberia has axed 16 of its 18 daily flights between the two cities.

Fifth are the baubles thrown in to sweeten the deal: pounds 1.4bn in Government grants plus 21 acres of land north of St Pancras station, the London terminus. Long term, the land could be a development goldmine. Forty-five million people make return trips across the Channel. A lot of them will end up at St Pancras. There is scope for offices, shops, even a theme park.

Investors will have a chance to join the party next year, when LCR is planning a stock-market flotation. For investors wanting to get in on the ground floor, their only quoted ways in are the bus operator National Express or London Electricity. The smaller National Express will enjoy a greater proportionate boost if LCR is successful (and suffer more pain if it fails). If you believe in Mr Whitehorn's vision, the shares, at 449p, could be worth a flutter.

Mortgage tears

THE EASY bit about being a banker is to borrow money at a low interest rate and lend it out at a much higher rate. The difficult bit is to identify borrowers who are actually going to pay the money back. Bad debts have always been a problem for high-street banks.

In the past they have shown an unerring ability to spot the most feckless borrowers and throw armloads of cash at them. Just now, however, they are being remarkably restrained and, as a result, the profits are rolling in. Barclays last week reported profits before tax of pounds 2.1bn. HSBC, owner of the Midland Bank, made pounds 3.7bn.

Still, a favourite parlour game among bank watchers is to guess the next black hole.

One man with everything to lose is Michael Foot, who last week stepped into the post of head of banking supervision at the Bank of England. The job ranks alongside the England football team manager and the British Gas public relations director as the ultimate poisoned chalice. Mr Foot's predecessor, Brian Quinn, took plenty of flak in the wake of the Barings crash.

Mr Foot is making sure he cannot be accused of belatedly locking stable doors. Last week, he issued his first warning. His worry? Mortgages.

Too many banks want to expand their mortgage books. Abbey National, Lloyds Bank and the Alliance & Leicester are among the financial institutions aggressively trying to win new business. Meanwhile, some of the building societies are fighting back.

As supervisor, Mr Foot is in the unique position to see every bank's and many building societies' future plans for the mortgage market. "We can put these together and see the numbers don't add up. Somebody is going to be disappointed," he told the Financial Times.

It would need a stupendous recovery in the housing market to justify the current mortgage hopes of the banking industry. Even with house prices finally hardening, the confidence is overdone. There will be tears before bedtime unless the banks heed Mr Foot.

Greedy Granada

THERE is cheek, and there is outrageous chutzpah. Granada's Gerry Robinson has the latter. The Office of Fair Trading allowed him 15 months to dispose of the motorway service stations acquired in the Forte deal. Instead of finding a buyer, he seems more intent on exploiting its temporary monopolistic stranglehold to the full. As Richard Phillips reports below, he has already raised prices, in some cases by twice the inflation rate. And he can go on exploiting that monopoly power for another 14 months. The OFT has been too generous. My advice to motorists, meanwhile, is: don't venture on to the M4 with an empty stomach.

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