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Eurostar sell-off raises concerns over handling of public assets

20 January 2016

The Public Accounts Committee finds that while the sale was well-handled, the process provides further evidence of the Government's tendency to undervalue public assets it is selling.

The Committee of Public Accounts publishes its Sixteenth Report of this Session, following its inquiry into the sale of the taxpayer's stake in Eurostar.

Members conclude there is an over-reliance on a small pool of financial and legal advisers in some asset sales and projects, and the government relies heavily on external advisers for corporate finance skills and expertise.

The Report also highlights the Committee's concerns about the Department for Transport's approach to evaluating the benefits and economic impact of transport projects.

It is concerned the Department does not accept its own evaluation of HS1 shows the project was poor value for money – and describes the two year delay in publishing this evaluation as "unacceptable".

The Committee finds this meant "important information that could have been used by Parliament to consider other projects, such as HS2, was not available".

It calls on the Department for Transport to develop a "robust way" to evaluate its investments and report on progress by September 2016, and urges that in future such evaluations will be made available "promptly regardless of their findings".

Chair's comments

Meg Hillier MP, Chair of the PAC, said today: “The public's stake in Eurostar was sold for significantly more than valuations had anticipated - but also significantly less than the total invested by taxpayers.

"We now also know, following publication of the government's much delayed report, that the costs of HS1 far outweigh its economic benefits.

Taken together these facts raise serious questions about the government's approach to valuing public assets, as well as its commitment to considering the value for money of public spending on such expensive projects.

In particular it is deeply concerning that work towards HS2 should have progressed without full and detailed consideration of HS1.

The government's evaluation of HS1, produced at the urging of this Committee, could and arguably should have been a key piece of evidence in scrutinising plans for HS2.

Instead it arrived two years late, since when the government has claimed benefits arising from HS1 that cannot be measured by its own methodology. It is simply not good enough.

HS2 would require huge public investment and taxpayers are rightly concerned that their money should be spent wisely. This case will do nothing to reassure them."


Eurostar is the sole operator of passenger rail services between London and continental Europe via the Channel Tunnel.

Previously the UK arm of Eurostar was part of a consortium London and Continental Railways (LCR) which planned to privately finance a new high speed line (now known as HS1) between London and the Channel Tunnel.

However, passenger numbers through the Channel Tunnel were significantly lower than forecast and taxpayer support for the company was required.

Following a number of restructurings a new Eurostar company was formed in 2010 of which the UK government owned a 40% stake alongside the national rail operators of France, SNCF (55% stake) and Belgium, SNCB (5% stake).

In March 2015, following a competitive auction, HM Treasury sold its 40% stake in Eurostar for £585.1 million to Patina Rail LLP, a consortium made up of Caisse de dépôt et placement du Québec (CDPQ), a Canadian investment fund, and Hermes Infrastructure (Hermes), a UK-based fund.

Department for Transport did not have "sufficient understanding"

When the previous Committee examined the HS1 project - the high speed railway linking London and the Channel Tunnel in 2012 - it concluded that the Department for Transport did not have "sufficient understanding of the economic impact and regeneration benefits of transport infrastructure" and "gives insufficient attention to evaluating its major projects."

The Committee recommended that the Department "develop a full evaluation framework urgently, including an assessment of the economic impact and regeneration benefits for HS1."

The Government accepted this recommendation. The evaluation was expected to be published in summer 2013. However, the evaluation report was not released until October 2015.

Report summary

In March 2015 HM Treasury agreed to sell its 40% stake in Eurostar for £585.1 million, almost double the valuations produced before the sale by both the government's project team and UBS its financial adviser.

While some of this difference may be explained by the successful sale process and favourable market conditions, it is also further evidence of the government and its advisers undervaluing assets.

We are also concerned about the seeming over–reliance by government on a small pool of costly advisers for asset sales. For example, UBS, the financial adviser for this transaction, was also involved in the sale of the Royal Mail and High Speed 1 (HS1).

Eurostar also agreed, in a separate transaction, to redeem the government's preference share, providing a further £172 million for the taxpayer. The sale of the UK government's entire financial interest in Eurostar therefore generated proceeds of £757.1 million, significantly less than taxpayers' total financial investment in Eurostar which is estimated to have been some £3 billion.

"Costs of HS1 far outweigh its quantified benefits"

In October 2015, some two years later than expected, the Department for Transport published an evaluation of the economic impact and regeneration benefits for HS1. We are concerned that this delay has prevented the evaluation, which shows that the costs of HS1 far outweigh its quantified benefits, from being used to aid the scrutiny of other projects such as High Speed 2.

Despite the results of its own evaluation, which it described as "world class," the Department maintains that there are further "wider wider benefits" from HS1 that it cannot yet value which make the investment worthwhile.

Further information

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