Branson in last round of rail link fight

Virgin victories: Breakthrough on Channel Tunnel but cinema chain was won at a high cost

Eurorail, the consortium led by Lord Parkinson, and London & Continental, which includes Richard Branson's Virgin, have beaten off two other challengers for the right to bid to build the pounds 3bn Channel Tunnel Rail Link.

The two groups now go forward to a final shortlist. They have been the most high-profile and confident of the four bidders and yesterday Brian Mawhinney, the Transport Secretary, announced that the two other contenders - Union Link, which includes John Mowlem, and Green Arrow, led by Hochtief - had been eliminated from the competition. He said the bids had been judged on the basis of how much government cash they required to build the line, the level of risk they were prepared to take and the "evaluation of other transport benefits".

The Government is under pressure to build the 70-mile high-speed line between St Pancras and Folkestone quickly because of the embarassing contrast with France, which built its high-speed line in time for the opening of the Channel Tunnel. Dr Mawhinney stressed that the Government was on target to meet the schedule of announcing the winner before the end of the year. The line is expected to be completed by 2002 at the earliest.

The losing bidders will receive a government grant of a third of their costs, with a maximum of pounds 1.5m, paltry compensation given that one of the two consortiums is thought to have spent pounds 14m.

Ministers had originally hoped to limit the Government's contribution to pounds 1.5bn - this includes European Passenger Services, the government company that runs the Eurostar trains connecting London with Paris and Brussels. But it is now thought this figure will be greatly exceeded.

The two remaining bids are different in emphasis and character. London & Continental has made a virtue of the fact that its bid is not contractor- led, reflecting its long-term interest in running the rail service on the CTRL. It is seeking to run trains in conjuction with the West Coast Main Line, providing places such as Birmingham and Liverpool with a fast connection to the Continent.

Eurorail, which includes Trafalgar House, is seeking to build the line in two phases and also wants the most expensive part of the project, the tunnel between Barking and Islington, to be built in a cheaper single- bore tunnel rather than a twin bore.

Minutes of the Government's assessment committee which is considering the bids, leaked to the Independent in May, revealed that Eurorail's original bid was the most non-compliant of the four bidders but the consortium had been allowed to provide a late compliant bid.

The leak also revealed that allowing the bid process to take place simultaneously with consideration of the Parliamentary Bill was causing great difficulties to the assessment committee.Since the leak, ministers have agreed that no change in the route can be made without jeopardising the progress of the Bill, and this means that the process is likely to keep to schedule. Yesterday Dr Mawhinney attempted to ensure that bidders stop trying to press for alternative routes by saying: "We have no intention of changing the route for the new line."