The company operating the Channel Tunnel has declared it will take legal action against a UK government agency and withdraw all future investment in Britain unless controversial plans to triple its business rates are abandoned.
Investment Plans Scrapped Over Tax Concerns
Eurotunnel is set to cancel multimillion-pound plans to revitalise a major freight terminal in east London and axe a proposed direct freight service to Lille in response to reforms that would add £118 million to its tax bill over three years. Chief executive Yann Leriche revealed to City AM that the government's business rates overhaul would push Eurotunnel's tax rate on new projects above 75 percent, rendering planned UK investments unprofitable.
"It's impossible to understand these increases because business rates are a property tax based on assets," Leriche stated. "Our tunnels are the same, our terminals are the same, our trains are the same as three years ago. A tax increase with inflation or even our revenue, I would understand, but this is totally out of control."
Legal Challenge and Economic Consequences
The firm is now pursuing legal action against the Valuation Office Agency (VOA), which sets rates for central government, seeking a revaluation that could potentially reduce its tax bill to zero. Leriche warned that this legal process, based on the 1986 concession agreement between the UK, France and channel tunnel operator Getlink, might ultimately cost the UK government significantly if judges rule in Eurotunnel's favour.
According to independent estimates, Eurotunnel's planned passenger network expansion would create over 750 new jobs and provide a £1 billion boost to the economy. The abandoned freight service would have transported lorries from east London directly to Lille, northwest of Paris, primarily operating overnight to free capacity on other services and reduce traffic around Dover and the French capital.
Broader Industry Impact
The intervention comes during a pivotal period for cross-channel rail services, with the network opening to multiple operators for the first time. Virgin Trains recently received regulatory approval to challenge Eurostar, while three other operators including Trenitalia and start-up Gemini are also seeking approval.
However, Leriche confirmed that Eurotunnel would need to pass 50 percent of the business rates increase onto operators, potentially undermining the commercial viability of new market entrants. The proposed reforms, scheduled for implementation in April, would see Eurotunnel's annual tax bill surge from £22 million to £65 million.
Major transport hubs including Heathrow and Gatwick face similar challenges, with both airports warning of "eye-watering" 300 percent increases to their business rates bills if current government plans proceed.
