An update to the final business case for the Trams to Newhaven project, which reflects the impact of the ongoing COVID-19 pandemic, concluded that the economic case for the scheme remains positive.

The review aims to assess the impact any changes in public transport demand as a result of the crisis could have on the economic and financial case, first approved in March 2019. Members of the City of Edinburgh Council’s transport and environment committee will be asked this week to consider the updated final business case (FBC) and to approve continuing with the construction of the project.

The council’s economic advisers have developed a series of possible scenarios to stress-test the findings in the original FBC. These range from a return to business as usual to a permanent reduction in demand, taking into account short-term COVID-19 impacts and views on future growth. In each of the scenarios, modelling suggests that the economic case for the project remains, with a benefit-to-cost ratio of above one.

The financial assessment has found that the project can still be delivered within the budgeted £207.3m and that, in all but one of the scenarios, the impact on council reserves if the project is cancelled would be greater than continuing construction. While it is possible there could be a future call on council reserves to support financing costs as a result of COVID-19, in each scenario the scheme will finance itself, albeit in different timeframes.

The refreshed FBC also highlights that the completion will play a key role in the future growth and development of the city. Delivering the tram line to Leith will unlock a large area of the city for housing and economic development, while providing a low-carbon, clean mode of transport to densely populated communities.

Transport and environment convener Councillor Lesley Macinnes said: “It’s clear that the events of this year have had an unprecedented impact on the way we travel and that we’ll continue to feel the effects for the foreseeable future. In light of this, it’s essential that we assess the potential economic and financial impacts on such a significant transport infrastructure scheme.

“I’m pleased that the economic and financial cases for Trams to Newhaven hold up despite the ongoing pressures resulting from COVID-19. The delivery of this project is essential for the Capital’s green recovery, providing sustainable, low-carbon travel to one of the city’s most densely populated areas. We now have reason to be cautiously optimistic as we progress with construction.”

Transport and environment vice convener Councillor Karen Doran said: “The Trams to Newhaven project is exactly the kind of investment we need post-COVID-19 to ensure Edinburgh is a thriving, forward-looking place for people to live and work in and to deliver much needed housing, jobs and investment into north Edinburgh.”

Work on the Trams to Newhaven project was instructed to stop in March following guidance from the First Minister on COVID-19 and recommenced in June. While the site shutdown incurred costs, these have been covered by the overall budget and delays have been mitigated. An updated programme shows that the project is still working towards Spring 2023 for completion and is forecast to be delivered within the agreed budget.

Over recent months, Edinburgh has experienced a significant drop in demand for public transport, with long-term consequences expected including a decline in income to the tram service. The review of the FBC takes this into account, with even the most optimistic of scenarios projecting that passenger numbers won’t return to pre-COVID levels until the mid-2020s. Finally, the review of the FBC acknowledges the impact of COVID 19 on Lothian Buses and does not rely on any further payment of the extraordinary dividend which was anticipated in the original FBC.

Watch Transport and Environment Committee live via webcast from 10am on November 12.