The forecasts underpinning the construction of the Channel Tunnel largely and systematically overestimated the total size and growth of the cross-Channel passenger and freight markets. The share of the cross-Channel markets captured by the Tunnel was accurately predicted. However, this was only achieved through a competitive battle with ferry operators, which resulted in reduced tariffs. The combination of these two factors resulted in revenues much lower than predicted. For completely separate reasons, the construction costs of the Tunnel doubled. The cost benefit appraisal of the Channel Tunnel reveals that overall the British economy would have been better off had the Tunnel never been constructed, as the total resource cost outweighs the benefits generated. Users have gained significantly at the expense of owners (producers). The latter-both ferry operators and the Tunnel operator have incurred substantial losses. The single biggest component of user's gain has not, as originally expected, been in terms of travel time savings, but due to the transfer from producers. The longer-term evaluation of the project confirms the poor viability of the investment both in financial and cost benefit terms. Eurotunnel has in recent months been the focus of much media attention. In the Extraordinary General Meeting (EGM) of April 2004 the shareholders voted to replace the management with a new French-dominated Executive. Project DARE was launched in October 2004, with the aim to address the company's difficult situation. The developments over the next few months will be critical for Eurotunnel, given the approaching end of the Minimum Usage Charge (MUC) period in November 2006 and the start of the repayment of junior debt from 2007. (c) 2005 Published by Elsevier Ltd.
