News UK announces £1.6 billion bailout for London’s transport system

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UK announces £1.6 billion bailout for London’s transport system

News UK announces £1.6 billion bailout for London’s transport system

As part of the deal the government will review of Transport for London’s finances, which is expected to lead to fare increases © Charlie Bibby-FT

The British government will pump £1.6 billion into London’s public transport system to restore services and help prevent overcrowding as people return to work, operator Transport for London (TfL) said on Friday.

London mayor Sadiq Khan is now expected to restore full bus and train services, having warned they would be cut further without emergency state support, owing to the coronavirus epidemic.

TfL informed the London Stock Exchange on Friday that “an extraordinary funding and financing support package has been agreed between TfL and the Department for Transport to contribute towards TfL’s forecast funding shortfall.

“The funding package is based on the assumption that the funding shortfall will be £1.6 billion ($19.2, 1.8 billion euros) for the period 1 April 2020 to 17 October 2020.”

TfL has seen a 90-per cent drop in revenue from ticket sales during the seven-week coronavirus lockdown as passenger numbers slumped.

It has been paying the £600 million monthly operating bill from cash reserves but said the situation was no longer sustainable.

Khan on Thursday warned that without government funding, bus and Tube services would have to be cut to save money, as TfL tried to balance its books.

The government is urging people who cannot work from home to return to work in an easing of stay-at-home measures, while also calling for people to avoid public transport if possible.

The deal comprises a £1.095 billion grant and a £505 million loan, with the potential for £300 million more if there is a shortfall.

Khan will cede partial control of TfL, the local government body responsible for the capital’s transport system, to the central government over the period of the bailout.

The mayor has warned commuters to expect a one-per cent rise in fares as the operator tries to claw back losses incurred during the virus outbreak.

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