£700m budget shortfall threatens Birmingham infrastructure upgrades ahead of 2022 Commonwealth Games

Birmingham is facing a £700m budget shortfall ahead of the 2022 Commonwealth Games as a fresh row erupts over a contract to upgrade the city’s roads and bridges.

Talks are understood to have broken down between city leaders and the owners of a PFI contract to overhaul Birmingham highways.

The 25-year contract, started in 2010, is not part of the Commonwealth Games budget.

Industry sources said PFI investors ­estimate it will cost £1.7bn to complete the work, but Birmingham officials are sticking to a £1bn budget.

City leaders are understood to have written to the Treasury, which provides half of the project’s funding, to give them the green light to take control, collapse the PFI and oust Equitix.

It had been thought that a long-running row over the Birmingham roads contract had been concluded last year.

Outsourcer Amey, the company charged with delivering the works, agreed to walk away from the £2.7bn contract. Amey and the Labour-led council clashed over Europe’s biggest public roads contract over allegations that work was substandard.

Amey, owned by Spain’s Ferrovial, Heathrow’s largest shareholder, paid £215m to exit the deal. Spiralling losses had put it at risk of a Carillion-style collapse, threatening the loss of 20,000 jobs.

While the budgets for roads contract and the Commonwealth Games are completely separate, longstanding concerns persist over the impact trouble with the contract might have on the games.

Before it paid its way out of the deal, Amey warned: "If this project was to collapse, it could well hinder the Commonwealth Games preparations."

A talks ­insider said: “Removing Amey was a step in the right direction, but the interim contract with Kier runs out in June 2021 and there is no sign of the council starting the re-procurement process. They are jeopardising any new contractors’ ability to properly prepare for the Commonwealth Games.”

Former FTSE 250 builder Kier was inserted in Amey’s place on an interim basis until June 2021. But its contract was to maintain Birmingham’s roads rather than deliver crucial upgrades ahead of the 2022 games.

A spokesman for Birmingham City Council said: “The council is continuing to work with [PFI owner] BHL and all stakeholders to the project to ­develop the best value solution for Birmingham.”

CORRECTION: Contrary to what was implied by an earlier version of this article, the dispute over the contract to upgrade Birmingham's roads and bridges has nothing to do with the city's Commonwealth Games in 2022; the budgets are entirely separate, and the Games does not face a £700m budget shortfall as the article stated. It has now been amended, and we are sorry for the confusion.