Infrastructure Past, Present, and Future Casebook/Channel Tunnel

The Channel Tunnel also called "the Chunnel" is a 51-kilometer/31-mile rail tunnel beneath the English Channel. It connects south-east England and northern France. The Chunnel consists of two rail tunnels and a service tunnel in the middle used for maintenance and emergency evacuation. The tunnel carries high-speed passenger trains operated by Eurostar, the Eurotunnel Shuttle for both passenger and cargo road vehicles, and international freight trains.

Trains passing through the tunnel can travel at a top speed of 160 kilometers per hour. Plans to build a cross-Channel fixed link appeared as early as 1802; around twelve early proposals were made from both countries but with no success. Eventually, the current tunnel project was organized and constructed starting in 1988. It was opened for service in June 1994, costing almost 15 billion dollars in today's money. The project was privately financed by a consortium of British and French corporations and banks.

Getlink, formerly known as the Eurotunnel Group, is a public company based in Paris that manages and operates the Channel Tunnel, the Eurotunnel Shuttle train service, and earns revenue on other passenger and freight trains that operate through the tunnel. Since 1994, over 450 million passengers have traveled through the tunnel using Eurostar or Eurotunnel Shuttles and over 430 million tons of goods have been shipped through the tunnel.

Actors
The French Government, led by French president François Mitterrand and The British Government, led by British Prime Minister Margaret Thatcher signed the Treaty of Canterbury, where the two governments came together to allow the tunnel to be built.

The Channel Tunnel Group/France Manche (CTG-FM)

The British Channel Tunnel Group consisted of two banks and five construction companies. France–Manche consisted of three banks and five construction companies. This organization originally proposed and planned the tunnel.

Getlink

Getlink, formerly the Eurotunnel Group, is a company based in Paris that manages and operates the Channel Tunnel. Getlink also operates "Le shuttle", the railway shuttle service operated by between France and Britain. It transports passenger and commercial road vehicles under the Channel Tunnel by rail.

TransManche Link

TML was a group of British and French construction companies responsible for building the Channel Tunnel. At its peak it employed almost 14,500 people and spent more than $5.5 million per day.

Eurostar

Eurostar is a high-speed rail service connecting the United Kingdom with France and Belgium. The company operates the only passenger-rail service through the Channel Tunnel, but is separate from Getlink.

Timeline
The Beginning of the Chunnel

The idea for a Channel Tunnel, also known as the Chunnel, was first conceived in the year 1802 by French miner Albert Mathieu. Mathieu’s plan involved creating an artificial island in the middle of the English Channel where two tunnels from the English and French sides would meet. The means of transport would be horse drawn carriages, these would then switch out when meeting at the middle island. This plan would not gain any real traction and would later fail. However, this would start centuries of attempts at a similar tunnel that would try to connect the British isles to mainland Europe.

In the 1830s, decades after Mathieu’s first proposal, French engineer Aimé Thomé de Gamond would conduct the first geological and hydrographical surveys of the channel tunnel. His work on these surveys would continue until 1856 when he finally presented his findings to Napoleon the 3rd. De Gamond would present his own version of a channel tunnel, the first since Albert Mathieu over 50 years before. This proposal would have been a railway instead of the previous horse drawn method. De Gamond’s plan would ultimately fail as well. On the English side politicians and statesmen like George Ward Hunt, William Low and Sir John Hawkshaw would make similar pushes for a channel tunnel. However, these English statesmen would be even less successful than their French counterparts.

First Chunnel Attempt

The First attempt at the building of a channel tunnel would occur in 1876. An agreement was reached by the French and English to create pilot tunnels. This was to ensure that both sides would be willing to commit to the building of the actual tunnel. The first digging would commence in 1881 on both the French and the English sides. Leading the French team was Alexandre Lavalley (contactor of the Suez Canal) and leading the English side Sir Edward Watkin (British Railway entrepreneur). Both sides had successful first digs, however a year into digging, pressure from British media and politicians would cause the English side to end construction. This led to the ultimate failure of the project as the French could not continue their digging without British approval.

Pre-Modern Attempts

British prime minister David Lloyd George would be the first person to revive the channel tunnel project. He would make this proposal at the Paris Peace conference following the end of World war 1. However, due to paranoia and nationalism in the years following the war, the project was unable to regain any steam even with the support from the former prime minister. The British public and politicians wanted to protect the British isles after seeing the devastation caused by World war 1 on mainland Europe.

Not long after though the use of the airplane would cause these fears to change. French and British airpower became so strong that the English channel was virtually useless as a strategic point. There was no longer a defense reason against the building of the tunnel. Talks would begin between the two countries with new geological and technical surveys being conducted in 1964 and 1965. Nearly a decade later construction of the Channel Tunnel would begin in 1974. However, after a year of construction of the project, the British Government would indefinitely suspend the project

Building of the Chunnel

The British cancelation of the project would last until 1987. In the treaty of canterbury, British prime minister Margaret Thatcher and French prime minister Francois Mitterrand would agree on terms that would allow for the project to proceed. The first drilling of the tunnel would commence the following year. The French would begin their construction in the June of 1988, while the British began their drilling in the December of that same year.

In the first few months of the project, accidental deaths caused construction to slow down with new safety protocols needing to be implemented. Although, this would not stop the project. Late in the year of 1990, tunnels from both sides of the channel would meet underneath the english channel. Construction and finalizing of the project would happen over the course of the 4 years following this moment. Finally on may 6th, 1994, Queen Elizabeth the second and French prime minister Francois Mitterrand would hold a ceremony commencing the opening of the tunnel.

Policy Issues
Geology

The digging of the tunnel was an important and also one of the most complicated parts of building the tunnel. The geological layers of rock that make up the earth under the english channel were permeable layers of chalk. This meant was that the engineers needed to pick a deep layer of rock in order to prevent water from eroding parts of the tunnel. To do this, engineers would choose the "chalk marl" layer. The chalk marl layer was chosen due to its low permeability protecting the tunnel's from erosion, as well as for safety purposes due to this layer having low flint levels. This would later help prevent fires during the dig.

Part of this geological process also included the removal of fossils as well. While fossil digging was not an initial intention of geological surveys, digging uncovered highly fossilized layers of the Holocene and late Glacial eras. The resulting excavations were able to help scientists provide a more detailed picture of life that existed 13,000 years ago within the English Channel Valley.

Defense

The English Channel separates mainland Europe from the British isles. This separation over millenniums has aided in the repelling of invaders from the island. So for the British, creating a tunnel that on some level would render the defense of the channel harder, if not useless, was not something they were keen on. However, as decades progressed the threat of the Channel Tunnel to the British isles defenses weakened. The invention of the airplane and mass use of it in war changed warfare allowing for enemies to simply bomb the isles. With no real defense reason left holding back the British, construction of the tunnel was finally able to happen.

Migrants in the past few years have shown, however, that while a military threat may not exist, a security one does. Back in 2015, the migrant crisis faced by Europe began to put a strain on countries' migrant processing systems. This led to a mass of migrants simply going wherever they wanted to within the EU. Many migrants, after reaching Europe, would decide to make the further journey to Britain. With English being a much more commonly spoken language by these migrants, the UK seemed like a better choice to settle in. Since the UK was still in the EU at the time, freedom of movement would allow for these migrants to attempt just that.

In these attempts to cross, migrants would either try to sneak onto trains to the UK or much more dangerously, they would make attempts at entering the tunnel to cross. Many migrants over the years have died or been detained trying to make this dangerous journey. Although, in recent years both the UK and French governments have committed resources combating this problem by ramping up security at both stations and the tunnel entrance. While this has prevented further deaths from migrants entering the tunnel, migrants are now choosing to try and cross the channel itself, which can be just as dangerous.

Regional Growth and Development

A promise of expanded regional growth in the regions of Kent, UK and Calais, France, helped get public support. Both regions were relatively low income and underdeveloped regions of the UK and France. The project was projected to produce thousands of permanent jobs for both regions and be an economic engine. However, with many of the jobs requiring high skilled labour it was projected before the project even began that 40% of all the jobs required would have to come from labour outside the region. The tunnel has reportedly had little to no direct economic impact on the local economies since its opening. Calais in France does see economic subsidies from the EU for development purposes, however, Kent in the UK did not see any even when the UK was still in the EU. However, there are no reports that indicate that the subsidies received by Calais have anything to do with the presence of the Chunnel itself. The channel tunnel has however been able to facilitate expanded trade between mainland europe and the British isles with 25% of all imports from europe now coming through the tunnel.

A plan to open a second tunnel has also been in talks since the opening of the first one. Back when Margaret Thatcher had finally agreed to the project, part of the deal was that firm Eurotunnel would provide a plan for a second tunnel by the year 2000. The firm was able to meet their deadline and published their proposal, however there has been no real push for the second tunnel propsed by the firm other than Thatcher herself. Thatcher advocated that a second tunnel be built and that it allow drivers to freely cross it. This plan was deemed much too dangerous as a crash or accident would be much more likely in such a tunnel. While there continues to be no push to build a second tunnel, especially since capacity of the current one sits at only 50%, in recent years driverless technology has convinced many that such a tunnel might be feasible.

Institutional Arrangements
The Channel Tunnel is unique in that it is both a public private partnership and an intergovernmental project. It is a partnership between British private actors, French public actors, the British government, and the French government. In 1985 the Channel Tunnel Group, consisting of two british Banks and five British construction companies, and France-Manche, consisting of three French banks and five French construction companies combined to form Channel Tunnel Group/France-Manche (CTG/F-M) and presented a proposal to the French and British Governments to build the Channel Tunnel.

In 1986 the British and the French signed the Canterbury Treaty which authorized the building of a tunnel between the two nations and set out a framework for how the project was to be managed. The treaty also created the Intergovernmental Commission (IGC) which would represent the governments and oversee the construction and operation of the tunnel. A month later the Concession Agreement was signed giving CTG/F-M the authority to design, finance, construct, and operate the Channel Tunnel for 55 years before transferring it to the governments of the UK and France.

After the signing of the Concession Agreement CGT/F-M was absorbed by the newly created Eurotunnel Group(now known as Getlink.) Eurotunnel contracted with TransManche Link (TML) to construct the tunnel. TML was comprised of Translink and TransManche. Translink was formed by the five construction companies originally a part of the Channel Tunnel group and was responsible for building the British terminal and boring the northern half of the tunnel. TransManche was likewise formed by the five construction companies originally a part of France-Manche and responsible for building the French Terminal and boring the southern half of the tunnel. Once the Construction was complete control of the tunnels was returned to Eurotunnel and TML was dissolved.

Funding + Financing
Funding

Funding was always a major concern for the Channel tunnel. Initial estimates put the cost of the tunnel at £4.8 billion. Eurotunnel planned to raise £6 billion to cover these costs as well as any overruns the project may produce. When the tunnel opened in 1994 over £10 billion had been spent on the project. The budget overruns stem from three main sources: unfixed costs at the time the estimate was made, changes to the design mandated by the IGC, and the sheer size of the project. When the estimate was created in 1986 the only cost that had been fixed in any of the contracts that had been signed was the cost of the tunneling, the cost of the equipment and the rest of the construction had not yet been agreed on. Both the Treaty of Canterbury and the Concession Agreement gave broad oversight powers to the IGC both during construction and operation. The IGC used these powers several times to increase expectations for safety, security, and environmental protections on the project. All of these changes increased the cost of construction and were not anticipated in the original estimate. Finally, the Channel Tunnel was a mega project and mega projects rarely finish on time or on budget. It is clear that Eurotunnel expected overruns as their original plan was to raise £6 billion in capital which would have covered a 25% budget overrun. Tolls and usage fees were intended to pay back the loans required to finance the project as well as the maintenance and operations, and even turn a profit.

Financing

The project was 100% financed by private capital. Margret Thatcher was opposed to the use of public funding for the project. The British were also opposed to the use of public loans for the project to avoid any public risk should the venture fail. This created additional difficulties in financing the project. Eurotunnel had to cover costs with private loans which have much higher interest rates than publicly secured loans; this combined with the project overruns made the project much more expensive than was originally imagined. There were several points during the construction of the tunnel when it was unclear whether Eurotunnel would be able to continue construction of the tunnel as a look through any major British newspaper from the 1990s would confirm.

The tunnel has also experienced much less traffic than was initially estimated. All operational and maintenance financing comes from tolls and usage fees. This is the only way in which the governments of either country financially contribute to the project as the eurostar, the publicly owned passenger rail service between the UK, France, and Belgium does pay guaranteed usage fees to use the route. Lower revenue and higher interest payments than originally anticipated created years of financial uncertainty for the Eurotunnel.The company stayed afloat mostly through debt restructuring and obtaining extensions to their operating period granted in the concession agreement, first to 65 years then to 99 years. Eurotunnel paid its first dividend in 2008, twenty years after building began, at €0.04 per share. Dividend rates had risen as high as €0.41 per share in 2020 but dropped back to €0.05 per share in 2021 as the company reported a net loss of €113 million for the 2020 fiscal year largely due to a drop in usage caused by the COVID-19 pandemic.

Narrative of the Case, Lessons, and Takeaways
The Channel Tunnel is an important piece of infrastructure that links England/Scotland/Wales to mainland Europe. The tunnel was centuries in the making, and was the result of careful planning between French and British parties. After the Treaty of Canterbury in 1987, the tunnel would be built. The tunnel was financed through completely private funds. Although the tunnel had less traffic than initially expected and went over budget, it eventually started paying dividends to investors more than twenty years after its completion. From a traveler's point of view, the tunnel has been a great success that has made crossing the English channel more convenient, faster, and cheaper for both personal and commercial uses. In 2017, the chunnel facilitated the passage of over 20 million passengers and 1.6 million commercial trucks. However for investors, the tunnel has never met passenger expectations with the costs still outweighing the benefits by roughly £8 billion.

Efficiency

Overall, the tunnel has a mixed record on efficiency. The channel offers marginal improvements on time and experience crossing the English channel, compared to the only option of ferries that existed before. The journey time by car in le shuttle is roughly 40 minutes through the channel tunnel compared to roughly 90 minutes on a ferry. In addition, the tunnel provides more frequent service than the ferries. In addition, the addition of new options to cross the channel by both car and rail has resulted in cheaper options for consumers due to more competition. On the other hand, it is still hard to call the project “efficient” due to the fact that the project was a disaster for investors. Even with the efficiency improvements for travelers, the tunnel’s exorbitant costs make it hard to justify overall. However, the tunnel did have other ripple effects that are hard to quantify in a cost-benefit analysis, including further investment in Europe's high speed rail network, economic development, and more connectivity between the content and the UK.

Accountability

The tunnel is managed through the private companies and investors that built the tunnel, and this structure will be maintained until 2086. However, safety, security, and economic regulation is managed through the Channel Tunnel Intergovernmental Commission (IGC) that is a joint venture of the British and French governments. There have been safety incidents since the tunnel has opened. The most serious was a fire in 1996 that burned for 12 hours and forced the tunnel to be closed for over a month. Safety plans were disregarded and there were communication difficulties between french and english firefighters. While no one died, there were serious injuries and damage to the tunnel. While other fires have occurred since, none have been as bad as this one.

Adaptability

Although the tunnel from first glance only serves as a rail tunnel, it provides multiple ways of transit across the English channel. The tunnel has high speed passenger rail operated by Eurostar, vehicle and commercial vehicle traffic operated by shuttles, and traditional freight rail trains. Since the tunnel has been built, there have been multiple crises that have hit the tunnel. In the aftermath of Brexit going into effect throughout 2020, there has yet to be an agreement on whether UK or EU rail safety standards will apply in the tunnel. Furthermore, new travel and freight restrictions have affected travelers and freight traffic. While the most disastrous potential outcomes for the tunnel from Brexit have been avoided, the new cross-border travel situation has reduced travel across the tunnel. In addition, the COVID-19 pandemic severely reduced travel in the tunnel. In February 2021, passenger numbers were down 71% and freight traffic was down 31% compared to the year before. This was due to the combined effect of both Brexit and the pandemic. As mentioned earlier, the operators of the tunnel lost €113 million in FY 2020. In recent years the tunnel has also had to deal with a surge of migrants and an immigration crisis. At the height of Europe’s refugee crisis in 2015, over 37,000 migrants tried to flee to the UK using the Chunnel in a 7 month period. Calais, the French side of the tunnel, became home to thousands of migrants living in temporary camps, and the governments of the UK and France were forced to spend millions of dollars reinforcing security.

Discussion Questions

 * How will Brexit and the aftermath of the pandemic affect the future of the tunnel?
 * In your opinion, was the decision to make the tunnel rail instead of road correct?
 * Should the chunnel and other similarly important pieces of infrastructure have been financed through private funds or public funds?

Additional Readings
"The Regional Impact of the Channel Tunnel Throughout the Community." European Commission, Office for Official Publications of the European Communities, 1996, http://aei.pitt.edu/99131/1/21.pdf.

Goldsmith, Hugh, and Patrick Boeuf. “Digging beneath the Iron Triangle: The Chunnel with 2020 Hindsight.” Journal of Mega Infrastructure & Sustainable Development, vol. 1, no. 1, Routledge, Jan. 2019, pp. 79–93, https://doi.org/10.1080/24724718.2019.1597407.

R W Vickerman (1987) The Channel Tunnel and regional development: a critique of an infra-structure-led growth project, Project Appraisal, 2:1, 31-40, DOI: 10.1080/02688867.1987.9726592 https://doi.org/10.1080/02688867.1987.9726592

Ziegelmeir, Michael. “Privatizing the ‘Chunnel’ Project - Success or Failure? - A Governance Analysis of a Public-Private-Partnership in High-Speed Rail.” Mar. 2019, pp. 1–25., https://www.researchgate.net/publication/336285232_Privatizing_the_Chunnel_project_-_Success_or_failure_-_A_Governance_Analysis_of_a_Public-Private-Partnership_in_High-Speed_Rail