GRANDEUR AND PROFIT DON’T MIX

Why Chunnel can't dig itself out of this hole (Murdo MacLeod , The Scotsman, June 12th, 2004)

Former Eurotunnel executives have admitted their early passenger estimates were "completely potty" and even a troubleshooter brought in to turn the company around believed the situation was hopeless.

Potential investors were told that 21 million people a year would use the service - three times higher than the actual number - and no allowance was made for increased competition from ferry companies.

These revelations are contained in a BBC documentary to be screened this week which explains why the Channel Tunnel has been a financial disaster despite being regarded as an engineering triumph.

The devastating film comes as Eurotunnel executives prepare for a make-or-break AGM this week, at which angry shareholders may try to oust them. The firm is £6.4bn in debt and has too little income to pay off loan interest. On Friday, its chief executive, Jean-Louis Raymond, quit.

The documentary, Britain's Biggest Black Hole, predicts that the Channel Tunnel operator will struggle to survive and neither the banks nor shareholders will recover much of their original investments.

David Freud, an investment expert at the securities firm Warburg, tells how he helped draw up forecasts for traffic numbers. He now admits they were far off the mark. Freud's report, which was published in 1987 in the run-up to the company being floated on the stock market, gave passenger and freight forecasts which were as much as 50% higher than previous studies.

The study was seen as key in persuading a deeply sceptical City that the Chunnel was a good investment.

At least when the Church was trying to raise money for all those medieval cathedrals, it didn’t stoop so low as to promise Europe’s princes and peoples they would recover their investments from the mead and relics concessions.