Channel link survives financial nightmare: Tunnel operator sets about task of turning project into a success after years of conflict over the soaring costs of construction

WHEN THE 10 building contractors of Transmanche Link hand the keys to the Channel tunnel to Eurotunnel today, they will put behind them the longest, costliest and most acrimonious dispute the construction industry has ever seen.

The tunnel may be a triumph of engineering skills, perseverance and Anglo-French co-operation. But it has also come perilously close to being a financial disaster on an unprecedented scale, knocking the Humber Bridge, Canary Wharf and even Thorp into a cocked hat.

A project that was supposed to cost pounds 4.8bn has more than doubled in price to pounds 10bn and when the Queen and President Francois Mitterrand preside at the state opening next May it will be exactly a year late entering service.

Almost from the day Eurotunnel won the concession to build the link in January 1986, the project has been dogged by crisis.

The root cause was, invariably, money. To Sir Alastair Morton, chief executive of Eurotunnel, the five British and five French firms that make up TML were grasping contractors, intent on shoring up their own creaking finances by milking the project, and the shareholders and bankers financing it.

To construction chiefs at TML, Eurotunnel was the usual cheeseparing client, demanding a Rolls Royce for the price of a Ford.

The inevitable conflict brought the project to the brink of collapse several times, twice forced the Bank of England to intervene to prevent Eurotunnel's bankers pulling the plug, and twice obliged Eurotunnel to refinance.

Even before the first piece of rock was cut under Shakespeare Cliff, Kent, in December 1987, Eurotunnel had been forced back to its banks for stop-gap funding, and mutterings of discontent over escalating costs had begun to emerge from the contractors.

The first full year of construction was a nightmare. The five contractors on the UK side hit unexpected geological problems and by the end of 1988 only 4 per cent of the tunnel had been dug. Time-scales began to slip and costs began to escalate.

TML caught up in time for the two teams of tunnellers to break through from opposite sides in December 1990 - but the price was high in human and financial terms. Nine workers had died and the cost was up to pounds 7.5bn.

So poisonous were relations between contractor and client that in the space of a year the top managements of both Eurotunnel and TML were cleared out and replaced in an effort to heal the breach.

It worked temporarily. But the cost of digging the tunnel was soon to be dwarfed by an more damaging row over the cost of fitting it out. The dispute burst to the surface in July 1991 when TML submitted a claim for pounds 1.4bn.

The ensuing row dogged the project for two years and saw the contractors and Eurotunnel in and out of the French courts as they fought piecemeal battles over every kilometre of railway track and electrical cable laid under the Channel.

In the meantime, Eurotunnel was in dispute with the British and French governments for failing to provide adequate rail links, with the consortium building the shuttle trains over the cost of the fleet, and with British Rail and the French operator SNCF over delays to the start of through-rail services.

In all the conflict, the achievements of the last seven years have rather been overlooked. It has been Europe's largest single construction project - employing 15,000 at its peak - which has produced Europe's longest tunnel, housing one of the world's most advanced and complex railways, with the capacity to handle a forecast 45 million passengers and 26 million tonnes of freight a year by 2000. Eurotunnel's task is to make it work.

(Photographs omitted)