Penalties wipe out profits at Metronet

Metronet, the private consortium which owns two-thirds of the London Underground, made no profit in the first half of the year after being hit by heavy financial penalties for poor performance, it emerged yesterday.

The engineer W S Atkins, one of the five members of Metronet, disclosed that it suffered a loss of £400,000 on its overall involvement in the Tube maintenance programme in the six- month period, compared with a £1m profit a year earlier.

Metronet made £54m in profits last year and £65m the year before that. But this year it could be heading for a loss after a report last week from the watchdog body, which polices the London Underground contracts, declared it was not proving to be "economic or efficient".

Atkins made a £2.3m profit on its 20 per cent equity investment in Metronet in the first half of last year. But in the same period this year, it recorded no profit. This means that none of the four other shareholders - Balfour Beatty, Thames Water, EdF and Bombardier of Canada - are likely to have made profits either.

In addition, a joint venture called Trans4m, which supplies services to Metronet and of which Atkins is a member, made a loss in the first half of £2.4m. Atkins' share was £600,000.

Atkins chief executive Keith Clarke, who is looking to stand down as chairman of Metronet, said that the first-half loss showed that the Public Private Partnership set up by the Government to run the Tube network was working. "Under the contract we get rewards when we do a good job and, if we don't, we get punished. The fact that we are making no money at all shows that the transfer of risk to the private sector has been successful."

Pre-tax profits for Atkins rose 10 per cent overall to £31m.