Mersey mission

2 April 2012 Steve Nicholson, Mersey Gateway project director, Halton Borough Council
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In the last six months, we at the Mersey Gateway project have secured conditional approval and increased funding from government for the new toll bridge over the River Mersey between Runcorn and Widnes, and shortlisted three bidders for the scheme.

At a time of austerity this may sound like squaring the circle, but once Mersey Gateway was put on hold in the 2010 Comprehensive Spending Review, we focused on reinforcing its critical importance to the coalition. With the economic downturn leading to a 15% decrease in projected opening-year traffic levels, we needed to review the level of PFI credits with ministers. 

Although we remained confident about the benefits – underlined by the support we received from business and the public sector – our proposal to meet 75% of the project cost from tolls was the decisive factor. 

After securing go-ahead in October 2010, we worked with the government to reduce the project’s whole-life costs by 8%. The capital cost of the project including land is estimated at £604m, with whole-life project revenues exceeding £2bn.

Tolls will be regulated by the council, which also takes demand risk, with the objective of tolls being in line with those at the nearby Mersey Tunnels. The conditional funding package now agreed with government provides an annual revenue grant of £14.5m, an annual increase of £5m on the original 2006 agreement, to replace the expected drop in toll income.

However, there is a built-in mechanism that allows government to retain some of this revenue grant, so that if toll income is higher than expected the grant will be reduced accordingly. I believe this sharing of risk and reward may be a funding template for other toll roads being considered in the UK.

The transport department and Halton council will share any savings generated in procurement, and the council can use up to 10% of toll revenue to fund discount schemes. The draft contract structure includes innovative options for sharing toll risk in a PPP integrated with a more traditional service availability-based contract. The aim is to harness private sector expertise in managing toll concessions alongside an efficient project finance structure.

We now look forward to construction beginning late in 2013 and the new bridge opening in late 2016. There are still challenges ahead, but we are well placed to deliver the project and the economic prosperity it will bring to the region.

This page was last updated on:
2 April 2012.

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