The Chunnel in History: Breakthrough or Continuity?

Abstract

This paper places the Channel tunnel project (the Chunnel) in a historical context of privately financed transportation mega-projects. We examine the extent to which the Chunnel represents a break or continuity with the past by looking at the technological, financial and intuitional dimensions of innovation compared to previous projects. We also analyse the project’s economics from a long run perspective. Although rightly hailed as an engineering triumph, the Chunnel’s main innovation was in the scale and form of private financing. Rather than being something completely new, we argue that this was a reinvention of financing techniques commonly used in the latter half of the nineteenth century. The project’s failings in terms of cost overruns, delays and over-optimistic demand forecasts certainly represent continuity with the past. In contrast to previous authors, we argue that the Chunnel should be portrayed as both a financial and economic success story. To support this case, we present a new simplified economic analysis suggesting a 3% to 6% return over the very long term. The Chunnel’s place in history is assured, but its long term legacy and continued relevance will depend in part on how well we learn lessons for delivering the trans-European networks of the future.