Backing Eurotunnel

Backing Eurotunnel

21 Jun 2004

Andy Milne considers the imperatives of keeping Eurotunnel solvent
No one who has walked the quiet serried ranks of war graves in northern France can seriously doubt the wisdom of a united Europe.
Debate may rage over the ill conceived federalist constitution and the interfering bureaucrats of Brussels. However, the noble and enduring sacrifice of American, Canadian, Polish, French and British troops on the beaches of Normandy in June 1944 can best be honoured by a Europe that operates in freedom. A Europe that lives without malice and without frontiers.
Britain has only one land frontier with mainland Europe. Sunk below the sea, the Channel Tunnel seems destined to sink still further under the weight of its own debt. However, it is far from being a failure and remains one of the twentieth century’s most remarkable feats of engineering.
A board room coup earlier this year and the steady slide of its share price, should in no way be interpreted as indicative of the company’s long term trading potential.
Eurotunnel uses half the available transit capacity itself and has built up a startling 43%  of the truck market and 47% share of  the car market. This has been achieved in just ten years - a quite dramatic market penetration by any measure. 
The other half of the transit capacity is reserved for rail services like Eurostar and EWS International. Although EWS clawed back a 19% rise in traffic last year after the closure of the Sangatte illegal immigrant camp, freight volumes have remained disappointing.
When the tunnel opened, Railfreight Distribution and Eurotunnel envisaged a figure of  7 million tonnes a year. Only 1 million tonnes has so far been achieved. Eurostar similarly failed to reach the target of 16 million passenger journeys, achieving just 6.1 million last year.
However, the combination of Richard Brown as managing director and the Channel Tunnel Rail Link is closing the gap. This won’t happen quick enough to help the balance sheet at Eurotunnel.
The main financial challenge is basically the initial cost of the project. The price soared up to ten billion pounds; double what was envisaged and all raised from the private sector. Under the Treaty of Canterbury both the French and British governments are precluded from funding the shortfall out of  the public purse.
Eurotunnel now struggles to pay off the interest on its loans, set aside any thought of the debt itself. Any one who’s fallen foul of a credit card company, will sympathise.
Yet it remains a new wonder to be able to get on a train at Paris and off at London, to drive down to Folkestone and ride under the sea to Calais. The automobile trade rejoices at being able to export whole trains of cars securely sealed in their covered  wagons with no attendant risk of transhipment.
There is something rather wonderful about French train drivers drinking coffee at Waterloo, or helping out as they did on the Heathrow Express in the early days. Eurotunnel is worth far more than ten billion quid! It should be seen as an engine that enables Britain to trade in Europe more successfully.
How can it be helped? Certainly Eurostar is working hard to increase market share and boost the take up of its offer. We can expect further improvements and greater success once the CTRL is open in its entirety.
However, it does not use all its capacity. This needs to be freed up for local operators running trains between Maidstone, Staplehurst  Ashford, Calais, Boulogne and Amiens. The Pas De Calais unlike Kent, is widely underdeveloped and boasts 10% unemployment.
Could these people work in Kent, which is resistant to new business and building development? Some British people already make their homes in northern France travelling to work in London and southern England - they should be encouraged.
Unlike other frontier zones, there is pretty much no health, education and emergency service link up. However, Eurotunnel is already backing the joint degree courses offered by Kent University and the University of the Littoral, based in the Nord pas de Calais. Students flit back and forth using the tunnel as easily as a gap in the hedge. More Eurostar passengers and an Inter-regio semi-fast service  would certainly help.
Freight presents more of a challenge. Rail freight’s central problem is that it resides in the fiefdom of EWS. One former RfD executive commented, ‘It is absurd that a French freight forwarder wanting to use the tunnel will be put through to a call centre in Doncaster.’
Another told horror stories of American officials from EWS  insisting on all documentation being in English. For the SNCF - moving thousands of freight trains around Europe - this is simply not done. The hard work put in by Railfreight Distribution did not translate into creditable commercial success under EWS.
Eurotunnel, before the current board room upheavals, had moved some way to ameliorating the situation. The creation of Europorte 2 aims to access the newly opened French rail freight market. The first route will connect Italy to the UK.
From early-2005, Europorte 2 will haul trains between Basle, Switzerland and the economic centres of the UK on a rail freight corridor linking Milan, Basle, Metz, Lille and the Midlands.
Eurotunnel says it envisages operating five trains per week in each direction rising to 30 trains per week by 2008. Now the idea has been put on hold until the conclusion of the new board’s review. 
Joint venture
However, the development of a cohesive European rail freight service is an imperative. It could be a new joint venture between the French and British governments: The new RfD, Fret de Manche, running as a stand alone company with generous public funding to get it off the ground.
A packed Eurostar, new regional services and a fully fledged international freight company will not save Eurotunnel. Irrespective of the Treaty of Canterbury, a way must be found of writing off the cost of construction and doing away with the disgrace of debt interest payment.
If Europe is truly united then surely a formula could be found. Public money does not have to come from London or Paris. What about Berlin, Rome and Bucharest, a latter day closure on the war and a solid statement of faith in the future.

It may be only a tunnel but it remains Britain’s sole land frontier with Europe. The dead of two world wars, many railway men among them, sleep beneath the fields we traverse so quickly. Compared with what we know of the horror of war, an open, debt free frontier is easily feasible. We owe both them and our children no less.

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