London and Continental Railways (LCR) last night confirmed there were "difficulties" in relations with its partners in the planned service, the French, Dutch, and Germans, but denied that a final decision had been taken about the future of the sleeper trains.
The problems stem partly from doubts over whether the service would ever make a profit, given the increasingly severe competition from cut-price air travel.
The embarrassing news is just the latest disaster to hit the sleeper service, billed as "hotels on wheels" when the original order was placed by British Rail some five years ago. The trains, built by Metro-Cammell - a subsidiary of GEC Alsthom - at a cost thought to exceed pounds 200m, have been dogged by technical problems which have already delayed the service by two years. Like the Eurostar trains, they need to cope with differences in gauges and power supply systems between the UK and the Continent.
Rob Holden, LCR's finance director, said the company would meet with partners in the European Night Services venture next month to decide the fate of the service. He said: "We cannot operate in isolation here. It's fair to say there have been some differences between the partners."
He also insisted the setback would not jeopardise LCR's plans for a pounds 1bn stock market flotation. Asked whether the float may have to be put back or abandoned, Mr Holden replied: "Absolutely not." Preparations for the float are due to start next year.
If the sleeper service is abandoned, sources suggested LCR may have to write off some of the value of its investment. It will also be left with several surplus locomotives handed over from British Rail. Industry experts said the carriages could be turned into conventional day trains, but this would need substantial investment.