Today's Telegraph reported that for the first full week of the M6 Toll road it was used by an average of 34,612 drivers per day - 20% of the traffic.
According to other news reports nearly all were private cars @ £2(with discount) per trip. Accepting it is early days yet, if that turns out to be the normal usage this will be a gross revenue of approx £25M a year.
I am no economist but on an investment of £900M an income of £25M does not make it a viable commercial proposition. I have no idea what it costs to run and maintain the road out of that revenue but it must be considerable.
I believe however that after the first 10M vehicles have used the road the £1 discount goes and cars will be charged £3. - that should be in about 9 months time. However with increased charges the law of diminishing returns comes into play.
So if it turns out to be commercially unviable it will hardly encourage other privately funded roads.
What is the betting on a Government subsidy? It will still be cheaper than publically funded roads - won't it??
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In 9 months, revenues p.a. will go up to £37.5M; that's 4.2% return p.a. assuming NO increase in usage (as more people feel it's worth it, as price relative to a gallon of fuel slowly goes down, as more people get to hear about it, as more people use the M6 now it's anicer way to Manchester than the train, etc).
As to diminishing returns, once you're used to £2 to save half an hour, will you refuse to pay £3? I doubt it.
Also, there is NO cap on the toll, so it will slowly sneak its way up. The term of ownership for the builders is 50 years - plenty of time to increase.
Finally, why a Government subsidy - let the company owning the road go out of business (if it did given the above) and then let someone else pick it up for a song.
No, I'll give you good odds AGAINST a Govt subsidy.
V
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Vin,
4.2% before running costs and Maintainance!
Mmmm What odds are you giving?
C
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Given the increase in traffic it can expect (expected to increase by 143% in the next two decades), and the increase in revenues when they get going, I'll give you 5/1.
At 4.2% they can afford to service their loans. Increases in traffic or tolls after that repay their loan (50 years is a long time) then it's all icing.
Also, ref maintenance, because they know they have to keep it for 50 years, I bet they designed it to stay the distance. In case you don't know, the design life of the M1 was 25 years, at which point they expected to dig it up as a whole (down to base foundations) and redo the lot. That's why older roads are constantly being dug up - they are far past the point where they need total renewal.
I'll give you your 5/1 that it doesn't need Government subsidy within the next ten years.
V
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Vin,
What I was getting at is that future roads will require subsidy. However as your odds are so generous I'll put 2 virtual pints on the M6 venture requiring subsidy.
But some further points:
BBC and ITV did tests with 2 cars at rush hour on the old and new M6; the saving in time was 19 Mins & 14 Mins.
The more cars that divert to the Toll road the less traffic on the old M6 and these time differentials are likely to reduce.
As for the predicted 143% rise! Well if ever there was a wet finger in the air and think of a figure exercise!! A pal of mine was heavily involved in the predictions for the M25 traffic. They did surveys for months on traffic getting across London, but did not take into account what a huge amount of traffic would come from within the M25, use the motorway and then go back inside the M25.
C
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Unless of course our 'government' decides to let our motorways fall into even greater disrepair thereby effectively forcing people to pay the tolls.
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I used the M6 toll on 18th Dec, at about 1400 hours. I was very impressed. Was almost completely empty. The way all motorways should be. It did shave about 30 mins off the journey time.
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