Channel Tunnel owner cancels UK rail projects over rise in business rates

The operator of the Channel Tunnel said it has cancelled all future rail investments in the UK because of an expected tripling in its business rates bill. 

Eurotunnel had scrapped plans to reopen a freight terminal in Barking and to run a new direct freight service from Lille and would make no further spending commitments in the country, its chief executive Yann Leriche told the Financial Times. 

From April, its business rates bill will rise from £22mn to £65mn under current proposals from the Valuation Office Agency that sets rates for the government. 

The expected increase “makes all of our investments lossmaking, so we won’t be making any more investments”, he said. “As of today, we have frozen our investment in rail assets in the UK.”

The two freight projects would have cost about £15mn and allowed the company to increase capacity in the tunnel by shifting trucks that run on trains during the day to freight-only trains that typically run at night. 

The company also passes on about half of its business rates bill straight to train operators, including Eurostar — and in the future Virgin Trains. 

Leriche warned that adding “tens of millions” to the bill for the operators would increase fares and delay them opening new routes or reopening passenger stations such as Ashford and Ebbsfleet. 

Eurostar said that “a three-fold increase in business rates for Channel Tunnel users for the second time would be at odds with the government’s ambition of economic growth, pioneering European rail connectivity, and encouraging low-carbon rail travel”.

While it still plans to invest €2bn in new trains, the added cost would be a burden to the business, it said.

“Throughout our conversations, we have urged fairness by treating international rail in the same way as domestic rail in business rates terms,” Eurostar added.

More than 8,000 trucks a day cross the English Channel between the UK and France via the tunnel or through the ports, but Eurotunnel only operates three dedicated freight trains a day — the equivalent of about 90 trucks. 

Reopening its Barking freight terminal — a project on which it was about to embark alongside Network Rail — would have allowed the company to offer more services and stem the decline of rail freight crossing the channel, he added. 

Its proposed service from Dourges near Lille would also have seen truck trailers transported straight to Barking, preventing lorries from adding to congestion north of Paris and freeing up capacity in the wider transport system. 

Eurotunnel is part way through an investment programme to spend some £90mn upgrading the tunnel to increase capacity from 400 trains a day to more than 1,000. This spending will not change because the contracts are already signed. 

While it could restart the freight programmes if the VOA significantly reduced its business rates and gave visibility on future rises, Leriche warned that the company might have already allocated the money to other projects outside the UK. “If you delay too long, you lose the opportunity,” he said. 

Leriche said the VOA’s decision was “100 per cent against the government’s strategy to protect jobs and growth”. 

Rail minister Peter Hendy told the House of Lords earlier this year that the government was seeking to encourage more freight to use the Channel Tunnel. 

He said that both the tunnel and its connecting high-speed line had “plenty of spare capacity”. 

Ministers want to increase the amount of freight carried by the UK’s rail system overall by 75 per cent under plans to nationalise the railway system. 

While the high-speed line that runs from King’s Cross St Pancras to the Channel Tunnel has been excluded from the privatisation plan, Hendy told the Lords in July that the government “clearly has an interest in promoting” more freight coming through the tunnel. 

Eurotunnel’s warning comes after Gatwick airport said future investments, including its second runway, could be jeopardised by a potential 300 per cent increase in its business rates bill.