Metronet, the London Underground contractor, has filed for administration in a move that threatens hundreds of jobs and puts a huge question mark over the future of the Public Private Partnership (PPP) scheme.

In a short statement this morning, the company confirmed that it had written to Ken Livingstone, the Mayor of London, to seek formally the appointment of a PPP administrator.

It follows a decision by Chris Bolt, PPP Arbiter, to dismiss a claim for £551 million of emergency funding on Monday.

He would grant Metronet only £121 million.

Alan Bloom, the Ernst & Young insolvency specialist who led the administration of Railtrack in 2001, has already been lined up for the same role at Metronet.

The RMT union, scheduled to meet Mr Bloom at 1pm today, said it would be seeking guarantees over the jobs and pay of its members among Metronet's 5,000 workforce.

A spokesman said: "We have said all along that Metronet's death throes shouldn't be allowed to decimate the workforce." Ernst & Young said only that there were currently no plans for any lay-offs.

Mr Livingstone insisted that the Tube would continue to run as normal and that maintenance work would not be affected.

He said: "My message to all Tube users is that they should be assured that this will not undermine services and that all trains will continue to run and all stations will remain open."

But Metronet's demise threatens to ignite a political storm over the use of PPP contracts to attract private sector funding into the biggest investment on the London Underground since the Second World War.

Gordon Brown championed PPP when he was Chancellor. It was fiercely opposed by the mayor.

Susan Kramer, the Liberal Democrat shadow transport secretary, said that today's development was a "disaster" for the Prime Minister.

She told Times Online: "Gordon Brown refused to listen to the experts in the industry who told him this would happen. It has and Londoners are the ones who are going to suffer.

"Tube users today are going to be wondering what will happen to their level of service. Administration is a process that can drag on for months.

"I think the Government needs to step in and take this back in house, and put the work in the hands of Transport for London, not an accounting company."

Taking questions in the House of Commons, the Prime Minister defended PPP and insisted the government remained committed to one of the biggest ever civil engineering programmes ever put in place for the Tube.

He added: "If Metronet pulls out, then another private company will be found to take its place."

Cost overruns on Metronet’s two 30-year contracts to upgrade nine out of the 12 London Underground lines have spiralled to nearly £2 billion.

Metronet today said: “Metronet BCV requires additional funding to enable it to carry out its contractual obligations during the period of the Extraordinary Review.

“This company has now established that it has no access to such further funds.

“Metronet BCV will therefore be unable to carry out its contract and has asked the mayor to seek the appointment of a PPP administrator.”

Metronet BCV is charged with maintaining the Bakerloo, Central and Victoria lines on the Tube.

Metronet said its other subsidiary, Metronet SSL, which runs the Circle and District lines, would also be put into administration as it was clear that it would also not be able to obtain emergency funding from the arbiter.

Mr Bolt attacked Metronet on Monday for operating in an inefficient and uneconomical way.

Yesterday Mr Livingstone urged staff to continue turning up for work but acknowledged that there would be “an awful lot of people” at the top of Metronet who face redundancy.

Transport for London insisted that it had contingency plans in place to ensure that the safe running of the London Underground would continue.

It is expected to take over the short-term running of Metronet's maintenance work before retendering the project to the private sector.

TfL said: "Our priority remains the delivery of a safe and reliable Tube service and of the promised improvements to track, trains, signals and stations.

"Metronet will continue to operate. The PPP Administrator's remit would be to enable Metronet's management to continue to operate with safety and business as usual being the principal objectives."

Weekly funding is in place, estimated at up to £30 million a week, to pay sub-contractors.

WS Atkins, one of Metronet's five shareholders, said today that the contractor's collapse "while not unexpected, is clearly disappointing".

It added: "Atkins's priority is to ensure an orderly and effective transition, working with the PPP Administrator to protect the safe and smooth operation of the Underground.

"Atkins remains committed to the creation of a world-class underground system for London."

Shares in the WS Atkins, which had already written off £121 million because of Metronet's cash problems, surged nearly 7 per cent in the City.

Andy Brown, an analyst at the stockbroker Panmure Gordon, said: "For seemingly too long the headlines have distracted investors about Metronet from the core operations of the Atkins group.

"Atkins has around 600 people working in the project and we would expect most of these to be redeployed back within the group and hopefully generating much better returns."

Metronet runs two of the three PPP contracts drawn up to attract the private sector funds needed for the biggest investment on the Underground since the Second World War.

Tube Lines maintains the Northern, Jubilee and Piccadilly lines.

Tempus: End of the line

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