Metro on track for a big cash shortfall
METRO operator Nexus could face a massive cash shortfall of up to £30 million without more emergency government cash, bosses have warned.
Public transport officials say they could be forced to make major cuts to Tyne and Wear Metro and Shields Ferry services, Nexus’ secured bus routes, and concessionary fares if central funding to prop up the struggling network does not continue beyond this week.
The latest of three Department for Transport support packages for the Metro totalling £24 million is due to run out on October 26, but Nexus is still losing around £500,000 a week because of the reduced passenger numbers caused by the Covid-19 pandemic.
A dire forecast has now been revealed predicting a worst case £30 million budget deficit for the 2021/22 financial year if government funding is discontinued, local council funding for Nexus drops, and passenger numbers remain low.
Metro bosses say that current North East lockdown restrictions have pushed patronage back below 50% of normal levels, after a gradual recovery over the summer.
The best case scenario, which Nexus is basing its initial budget proposals on, states that if all government emergency support continues throughout the next financial year and passenger numbers return to higher levels that would still result in a £3.7 million shortfall - which was expected even before the pandemic hit.
Nexus says that negotiations with the government are “ongoing”, but officials are hopeful that their current level of central government grant will still be available next year.
A report to the North East Joint Transport Committee (JTC) warns that an absence of new income would lead to budget cuts which could include “a review of concessionary fares reimbursement and secured bus services, together with a review of the Metro and ferry timetables and the provision of public transport information and key facilities”.
JTC chair and Gateshead Council leader Martin Gannon said on Tuesday afternoon that he was hopeful of a funding announcement this week, but that local leaders “need some certainty on that as quickly as possible”.
He added: “The prospect of not getting continued support would put us in dire straits. We would have to have some incredibly difficult discussions about how we would deal with that.”
Coun Gannon also warned that Nexus’ funding is “not sustainable” in the long-term and that there are fundamental underlying problems regardless of Covid-19.
Prior to the pandemic, Nexus had forecast a £3.7 million deficit in 2021/22 which could be covered by its reserves - but said it would need to make £3.2 million worth of service cuts in 2022/23.
But forecasts predicting that Metro passenger numbers may only return to between 60 and 70% of previous levels in that time leave a further income gap of between £16.5 million and £22 million.
Coun Greg Stone, Lib Dem member of the JTC’s Overview and Scrutiny committee, said council leaders should “give a clear indication to the public of what is at risk and the extent of the public transport service reductions they are anticipating”.
He added: “It has been apparent since before the Covid crisis that Nexus’s finances are not in a good place, and the uncertainty over fare income and Government support means the budget gap could end up being far greater than currently projected.”
A Nexus spokesperson said: “We continue to face a challenging financial position due to the effects of the Covid-19 crisis. Talks remain ongoing with the Government over further financial support for the Tyne and Wear Metro and the other essential frontline services that we deliver.”
A spokesperson for the Department for Transport said it recognised that this was a challenging time for the Tyne and Wear Metro and it was working closely with NEXUS to identify solutions and will provide an update shortly.