Keep the Eurostar Running After Covid and Brexit
(Bloomberg Opinion) -- When British Prime Minister Lord Palmerston was shown a design for a tunnel linking the U.K. and France in 1858, he reportedly responded: “Why shorten a distance we already find too short?”
That sentiment lives on more than 160 years later in the U.K.'s lack of sympathy for Eurostar's financial struggles, and even outright indignation at the thought of helping plug losses at a company that’s technically majority-owned by the French state. With a slew of post-Brexit promises to live up to, Boris Johnson and his Conservative allies are more interested in projects that will “level up” under-developed parts of the country, not a continent-facing route labeled “Maastricht made concrete” when it opened in 1994.
While a full taxpayer bailout seems a bridge too far, the Eurostar is still worth saving.
Whatever wonderment there was at catching a train in London to arrive in Paris two-and-a-half hours later, or Amsterdam in under four hours, is gone in the face of pricey testing requirements, safety checks and quarantines. Eurostar’s passenger numbers are down 95%, with just two daily trips compared with 50 before the coronavirus hit.
The problem is its ownership structure. Brits see the company as a French affair, given state rail company SNCF — itself bleeding cash — owns 55%. The French see it as a U.K.-based firm that runs on a British-owned chunk of high-speed rail. That’s left Eurostar to borrow money, furlough staff, cut costs and tap 210 million euros of funds from shareholders. Its pleas that it faces a “catastrophe” if it can’t stop burning cash have failed to move skeptics who reckon even if Eurostar goes bust, another firm could simply replace it.
Making an exception and example of Eurostar is a mistake regardless of who owns which bit. Both the U.K. and European Union want to be climate leaders, so why give a train service worse treatment than the emissions-heavy airline industry? Taking the Eurostar to Paris instead of flying cuts up to around 90% off carbon emissions. Yet even the regularly unprofitable British regional airline Flybe was initially offered state support and a review of its tax bill before the pandemic struck.
Even for a “railopoly” like Eurostar, financial support matters. If the operator somehow hobbles through this crisis, nobody expects rail travel to rebound to pre-pandemic levels for at least a couple of years. If it fails, the recovery will probably be further delayed. Even before Covid, Germany’s Deutsche Bahn had backed away from plans to serve London.
Leaving Eurostar to its pandemic fate because of its French shareholder also forgets the economic benefits that accrue to Britain. A report by U.K.-owned HS1, which operates the high-speed track connecting London and the Channel Tunnel, estimates tourists debarking from the Eurostar normally pump 2 billion pounds annually into the British economy and support the equivalent of 3,600 jobs. The back-and-forth of business travelers add around 130 million pounds.
Those benefits shouldn’t be forgotten, even if they seem far off right now. Chasing the U.K.’s mammoth HS2 plan to connect London with the north of the country while squeezing HS1 doesn’t make sense.
Johnson and French President Emmanuel Macron are clearly not on the hook to the same extent — the U.K. sold its Eurostar stake in 2015 — yet both sides have an interest in striking a deal. The U.K. charges Eurostar rail access, and at rates three times higher per kilometer than on the French side. It could make a gesture here, or offer financing at a favorable rate.
Either way, the spending would likely pale next to the billions shelled out by the British taxpayer since last year to run transport networks in London and beyond. The pandemic has exposed glaring failures in the U.K.’s entire approach to privatized transport, reckons Roger Vickerman, emeritus professor of European economics at the University of Kent.
There are many ways to throw Eurostar a financial bone that don’t egregiously soak the British taxpayer. Given the hurdles facing cross-Channel travel even after this pandemic ends — not least new barriers to the City of London’s financial-services trade — emulating Palmerston is a shame.
The 1992Maastricht Treaty created the European Union and laid the groundwork for the single-currency euro area. The U.K. left the former in 2020 and never joined the latter.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Lionel Laurent is a Bloomberg Opinion columnist covering the European Union and France. He worked previously at Reuters and Forbes.
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