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London tube privatisation in jeopardy, says business lobby

THE GOVERNMENT is likely to miss its deadline of part privatising the London Underground by April 2000, business leaders warned yesterday.

This could jeopardise plans by ministers to attract up to pounds 10bn of private capital into the Tube system through a public-private partnership.

It could also mean that the new mayor of London, who will have political responsibility for the Underground, will be voted into office before contracts have been signed with private consortia to take over the network's infrastructure.

Business leaders fear that this could slow down the process still further. London First, the business lobby group that is chaired by Lord Sheppard, the former GrandMet chairman, said potential bidders feared the timetable announced in August by the Deputy Prime Minister would slip.

Irving Yass, London First's director of transport and planning, said: "We have talked to 14 companies and they all think the timetable will fall behind. If the mayor is elected before the contracts are signed, that will pose a major problem for the Government which ministers have not yet thought through."

On present timing, the intention is to elect a mayor by May 2000, following the passage of the Greater London Authority Bill through Parliament. This is one month after contracts are due to be signed off under the public- private partnership for the Underground.

The mayor will implement transport policy through a new body, Transport for London, which will be in charge of a new London Underground operating company. Business leaders are fearful that if the elected mayor turns out to be ambivalent about the privatisation of London Underground, or openly hostile, then hopes of attracting private capital will be undermined.

The warnings about the timetable came from Railtrack, contractors such as Brown and Root, Alstom and Balfour Beatty and a number of financial institutions including Barclays and HSBC.

They are among more than 100 companies the Government listed in August as being interested in the part privatisation of the Tube. Ministers estimate that pounds 7bn of investment needed to modernise the network and a further pounds 3bn to maintain the existing infrastruture could be raised through the public/private partnership.

There are likely to be three companies in charge of the infrastructure, which will take over the running of the track, stations, signalling and rolling stock, provide the investment and charge the publicly-owned operating company a rental to use the network.

One contractor, Amey, has already said that the Government would be better to opt for a full-blown flotation of the London Underground, rather than a public-private partnership.