Coronavirus in Scotland: Pandemic may mean scrapping underway Edinburgh tram extension is cheaper than finishing it

Financial modelling, carried out on behalf of the council by London-based consultancy firm Steer, has outlined four possible scenarios for transport demand in Edinburgh post-coronavirus pandemic.

The first and most optimistic scenario assumes that demand for the central tram line returns to pre-covid levels by 2022, and demand for journeys to the airport returns by 2023.

This scenario would mean the council would need to use none of its reserves to fund the £207.3m budget it has earmarked for the Newhaven extension.

In this scenario, the cost of cancelling the project would far outweigh the potential returns the council expects to make on the extension.

However, the fourth and most pessimistic scenario projects a drop in demand of just 20 percent in the years following the pandemic would force the council to use £93m of its reserves and take until 2055 to pay back.

If scenario one becomes apparent, the council believes it will make £1.40 for every £1 it has invested, while if scenario four happens - and demand drops by 20 percent - the council will just break even by making £1.04 for every £1 spent.

The report advises councillors on the cost of scrapping the tram extension entirely: “To assess the opportunity cost of continuing with the project, the cost of cancellation has been considered, including the costs incurred to date, compensation payments that may become due to contractors and reinstatement costs totalling £60.2m.

“When considered alongside the £47.2m incurred on the project to 30 September 2020, the cost of cancellation would total £107.4m compared with £207.3 to build the line.”

The report also states that if scenario four comes to pass, then scrapping the tram extension would cost the council less: “The model is very sensitive to income projections and in the event of a significant fall in demand (scenario four), the long-term cost of the project would be more costly to the council than to cancel.”

Transport and environment convener, Liberton and Gilmerton councillor Lesley Macinnes, SNP, said: “It’s clear that the events of this year have had an unprecedented impact on the way we travel and that we’ll continue to feel the effects for the foreseeable future.

“In light of this, it’s essential that we assess the potential economic and financial impacts on such a significant transport infrastructure scheme.

“I’m pleased that the economic and financial cases for Trams to Newhaven hold up despite the ongoing pressures resulting from COVID-19.

“The delivery of this project is essential for the capital’s green recovery, providing sustainable, low-carbon travel to one of the city’s most densely populated areas.

“We now have reason to be cautiously optimistic as we progress with construction.”

Transport and environment vice convener, City Centre councillor Karen Doran, Labour, said: “The Trams to Newhaven project is exactly the kind of investment we need post-COVID-19 to ensure Edinburgh is a thriving, forward-looking place for people to live and work in and to deliver much needed housing, jobs and investment into north Edinburgh.”

Joseph Anderson, Local Democracy Reporting Service

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