/Crossrail: how Europe’s largest and most prestigious transport project stalled

Crossrail: how Europe’s largest and most prestigious transport project stalled

It was not an explosion, more like a “loud pop”, according to those who witnessed it. But the electrical failure at Pudding Mill Lane substation in November 2017 provided the first sign that Queen Elizabeth would not be opening the £16.8bn Crossrail line under London this year.

The sparks that erupted from a transformer that day might have seemed a manageable mishap. But it was to have far-reaching consequences, tripping off a series of delays and failures that have left the flagship rail project running two years late and as much as £2.2bn over budget, blowing a large hole in the finances of the capital’s transport authority.

Crossrail was supposed to be a state of the art scheme, transforming travel in London by adding more than 10 per cent to the capacity of the network. Delivered by a commercially savvy team insulated from politicians’ meddling, it would show that private-sector discipline could deliver public-sector projects on time and to cost.

Instead it has ended in humiliation for its leaders, and embarrassment for its political sponsors. The mess has claimed the scalp of Terry Morgan, who stepped down as Crossrail and HS2’s chairman this month amid allegations of mismanagement. Its chief executive Andrew Wolstenholme left in March before the news broke. 

Mayor of London Sadiq Khan is charged with failing to take responsibility when the warning signs first appeared

Now it threatens to suck in Sadiq Khan, London’s mayor, who is charged with inattention and of failing to take responsibility when the warning signs started flashing that the project was in danger.

But amid the battle over blame for the delays and overruns, Londoners and the general public could be forgiven for asking one simple question. How could some duff wiring deliver such a paralysing shock to one of Europe’s largest infrastructure schemes?

A project that was long in gestation, Crossrail was launched a decade ago on the cusp of austerity. The scheme received formal approval in 2008 just as the financial crisis was gathering pace.

It was always a major undertaking, involving digging 26 miles of tunnels through the honeycombed soil and clay beneath London’s streets. “Short of building a nuclear reactor, there’s no more challenging project to bring in on time than tunnelling under the capital and installing a mainline railway,” says Martin Blaiklock, an infrastructure expert.

Terry Morgan stepped down as Crossrail and HS2’s chairman this month amid allegations of mismanagement © Bloomberg

Yet delivering on time and to a sensible budget was crucial. Not only were the nation’s finances threadbare after the economic unravelling of 2008, there was also a long-running gripe about the outsized share of the budget that was given to Britain’s capital. For every £1 invested in transport infrastructure across the UK over the past five years, no less than 35.6p was spent in the capital, according to national statistics.

As Crossrail took shape, politicians bridled at a familiar bugbear: creeping cost inflation. A budget of £15.9bn had increased to £17.8bn by 2010. The coalition government took out its scalpel that year and cut it to £14.8bn (including a £600m contingency) in its comprehensive spending review.

Keen to insulate a publicly funded project from political tweaking, protections were wired into Crossrail’s governance. While the project remained within its new tight budget “envelope”, its sponsors — Transport for London and the government — would have no rights of intervention. 

They were confined to one board member each with limited rights to receive information, TfL officials claim. They had no say in hiring, contracts or the salaries and incentives paid to staff.

The deal gave Crossrail’s bosses great freedom so long as they lived within their budget. They took full advantage, paying themselves handsomely. When Mr Wolstenholme left this year, he received £765,689, including a £160,000 bonus, and £97,000 for “loss of employment”, despite numerous signs that the project was unravelling. The previous year, he banked £950,000, including a £481,460 bonus. 

A rail stamp near Whitechapel station, east London, marks the completion of the Elizabeth line © Bloomberg

But managers still faced the same challenges that bedevil complex engineering projects, not least in bringing together hosts of contractors to execute the works.

“People are always adventurous on costs and time because they don’t want to tell the truth,” says Philip Shepherd, a consultant who has advised banks and governments on rail projects worldwide. “Industry often doesn’t want to tell politicians the true story as they want the work, the politicians don’t know enough so take the view of the salesmen, who are going to push the latest, new technology even if it’s untested. And the management often doesn’t care because they know they won’t be there when the project isn’t delivered on time and to budget.”

None of that mattered so much in the early years, when Crossrail appeared to be making good progress. The tunnels went in largely without mishap, encouraging observers that the project would hit all its targets.

“So much had been done and it had gone so well, excavating throughout central London, overcoming all those challenges, there was just a belief that we could overcome any hurdle,” says a contractor. 

But promises on timing and costs became more important as Crossrail closed in on its final deadline. “Bringing together all the components on time to complete a big project like Crossrail is often subject to uncertainty and risk, leading to inevitable delays and cost overruns,” says Mr Blaiklock. “Apart from the tunnels and stations, the rolling stock, escalators, power transmission and train control all need to be tested and delivered on time.”

This exposed latent governance weaknesses. “The Crossrail board was about signing things off,” says one person who sat in on board meetings. “It endorsed everything rather than challenging them and asking questions.”

Politicians meanwhile had taken their eyes off the ball. When Mr Khan became mayor two years ago he dismissed TfL’s then representative on the board, Daniel Moylan, a Conservative politician who had kept a close eye on the project’s costs, and was seen by one individual close to the board as asking all “the difficult questions”. 

“Sadiq’s attitude was to give him a call when it’s time to cut the ribbon,” says one source close to the board.

By the time the lights blinked out at Pudding Mill Lane, the project was running behind. The explosion set off a chain reaction of glitches — delaying power to the central tunnels and thus all the extensive testing that needed to be done. At the same time fit-out work on the subterranean parts of the line — installing permanent lighting and drainage pumps — was also progressing more slowly than expected.

As managers gloomily digested the missed deadlines, they started to perceive a deeper problem — that the work was being done in silos.

Farringdon station, London, part of the Crossrail development, also known as the Elizabeth line © Charlie Bibby/FT

Mark Farmer, an independent consultant who advised the government on Crossrail’s construction strategy, says that, like all long-term projects, it suffered from management changeovers at contractors and suppliers. “You always have a lot of baton changes on large-scale projects like this,” he says. “So although they will have been suppressing bad news, none of the people who were round the table at the beginning are still there — it’s the nature of careers that no one stays for 10 years.”

This started to tell as the whole scheme neared completion. “If everyone is managing small risks themselves, who has the oversight to see the bigger picture?” says another source close to the board.

By the beginning of the year, the idea that the railway would open on time looked optimistic at best. Ten vast new stations — complete with artworks chosen by prominent London galleries — were supposed to open by September. They all remain at varying stages of completion. 

But even as Crossrail strained for the finishing line, a new problem emerged: severe financial pressures. As contractors raced to meet deadlines, they gobbled through its remaining cash. 

By the summer, Crossrail was forced to go cap in hand to the government for a top-up, securing £590m to meet “rising cost pressures across the project”, breaking the “budget envelope” and allowing the Department for Transport and TfL to start intervening in the project. That was followed by an emergency £350m loan in October. “I’m told this was needed just to keep paying the contractors day to day,” says an observer who is close to the project. “They really had their backs to the financial wall.”

Observers remain puzzled how Crossrail’s bosses could have signed off on the £590m as a final settlement, only to return weeks later. Daniel Moylan, the former director, believes it is connected to the master plan that Crossrail was following, the central document that sets out who does what when.

“It feels as if they clung on to the schedule they had until it became clear that it absolutely couldn’t be delivered,” he says. “But when they dropped it, it seems that they had nothing left to work to. That would explain what looks like a sudden collapse.”

Even now, with the new financing deal secured, it remains unclear precisely when the project will be completed. Most of the unfinished stations are expected to open in the new year, although Bond Street and Paddington are unlikely to be complete until the second quarter. 

The station at Berlin airport cost €6.5bn instead of €2bn and was finished nine years late © AFP

Beyond that, Crossrail faces daunting and unresolved challenges if it is to hit even the tentative backstop date of late 2020. These include integrating five different signalling systems, split between TfL, Crossrail and Network Rail, two of which are relatively untested in the UK. 

“Resolving the train software/signalling/integration issue is the fundamental point to getting the railway operational,” says one contractor. “It requires achieving a frequency of 24 trains an hour in each direction — one every two-and-a-half minutes.” 

In a sign of possible troubles to come, the software on the line’s Bombardier trains is not yet co-ordinated with the signalling system, forcing TfL to use old carriages on the stretch of line to Heathrow. “At some point the stations will be finished and the trains will be ready but the signalling and software won’t be ready so the trains won’t run,” said one consultant on the project.

Mr Shepherd says the issues with the system — where much of the modern signalling and control equipment is on board the trains — could have been predicted up to seven years ago had proper consideration been given to the programme and cost risks arising from its complexity. A shortage of senior signalling engineering experts (part of a global shortage) may also have added an extra challenge to the project, he added.

Crossrail remains unlikely to join the ranks of such truly undistinguished infrastructure projects as Stuttgart station (costing €9bn instead of the planned €6.5bn and three years late), or Berlin airport (costing €6.5bn instead of €2bn and nine years late). 

But it remains a major headache for London transport bosses contemplating the stretched finances of their network. After years of seemingly effortless growth, the number of passengers has largely stalled in the capital. Usage on the underground has declined by some 5 per cent since 2014, according to TfL’s latest business plan.

Meanwhile the mayor, Mr Khan, has capped fares — a policy that affects around half the tickets sold by TfL and runs until 2020. This has left the operator struggling to offset the withdrawal of central government’s operating grant. Five years ago that stood at £1.1bn; this year it is zero. 

Friday, 30 November, 2018

In the long run, Crossrail will be a lifesaver for TfL, helping to suck more passengers from London’s environs to the network and make its finances more sustainable. But in the next few years, the operator will lose £600m of revenue it had been counting on. 

The extra capital costs needed to finish the project, meanwhile, will fall mainly on the Greater London Assembly. It is borrowing £1.3bn from the government and injecting it into Crossrail as a grant, along with another £100m of its own money. This will be funded out of the annual £270m-a-year business rate supplement, which is earmarked for expanding infrastructure.

Ultimately, the Pudding Mill Lane “pop” may burst more than just the Crossrail bubble. Crossrail 2, London’s next mega project, was supposed to follow on, ending the disastrous British tendency for stop-start infrastructure. That may now be a pipe dream, having lost a critical piece of funding and the political will needed to push such as ambitious scheme.

“Crossrail 2 is as dead as a dodo,” says one observer of London’s City Hall politics. “You simply cannot fund it while you are still paying for Crossrail 1.”