1 Eurostar UK's revenues grew by 11 per cent in real terms in 2004 thereby exceeding forecasts, however, both passenger volumes and revenues forecasted in 1998 and in 2001 have proven overall to be too optimistic to date. The Department should continue to monitor the risks to which the taxpayer is exposed by reviewing the forecasts regularly so that it can make realistic predictions of the value and timing of future lending to LCR through the access charge loan.
2 To learn lessons about preparing and using forecasts in appraisals of future infrastructure projects, especially in relation to passenger numbers and revenues, the Department will need to determine and review the economic benefits realised as a result of the project. In the shorter term, the Department is already developing guidance on demand forecasting for highways and local transport. As part of this process it should seek to incorporate material on railway forecasting, including advice on the difficult area of forecasting for one-off projects like the Channel Tunnel Rail Link.
3 When we started our fieldwork, we found that the Department's management team which had been in post during our investigations for our previous report (published in 2001) had moved on. The Department's internal knowledge of the project's history and the background to key decisions had inevitably been reduced. The Department must develop a robust and reliable means of retaining project knowledge within the Department's personnel. Towards this end, the Department has now established its own in-house corporate finance expertise.