Friday 26 February 2010

Massive Government contract falls through...?

Transport Secretary Andrew Adonis has just announced that the Government has put the brakes on a £7.5bn train building contract.

The decision was taken, Adonis said, for two reasons – though Lobbydog suspects one is more pertinent than the other.

They say the rail network’s needs have changed after passenger growth slowed and further sections of track were electrified, meaning that a different type of engine than those ordered would be needed.

You’d think they would have known about the electrification programme when they ordered billions of pounds worth of diesel carriages.

Then, crucially, they say that there was a “reduction in capacity of the debt market” – suggesting the Government may not have been able to borrow cash to fund the project.

Did the banks think we weren’t good for the money?

The deal definitely won’t be signed before the next election – and then we’ll have to wait for the results of a review to see if it ever does.


Oldrightie said...

Piss ups in Breweries, the defining label of this Gummint!

Paul Pinfield said...

This fits with the pattern we have recently seen in the debt markets, whereby lenders are either extracting higher interest on UK debt, or are generally less willing to lend the money.

There is also another consideration. If Sterling continues to fall, the cost of servicing the debt increases massively. Sterling has devalued by over 8% since Christmas alone. Perhaps the government know what is in store for Sterling and realised what effect is might have on the national finances? But then again, they probably have no idea.

I have been a seller of Sterling since last August when it stood at 1.70 to the Dollar. Right now is stands at 1.52...

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