Originally published on February 24th, 2009

The construction of the controversial dinburgh tram system was dealt a further blow last week after the company due to lay track on Princes Street raised its costs by £80 million, leading to a halt in construction.

Laying of the track had been due to start on Saturday, but German company Bilfinger Berger claims that the extra sum, in addition to the £150 million it is already being paid, is required due to delays in earlier stages of the work, which has resulted in the complete closure of Princes Street until November.

David Mackay, chairman of Transport Initiatives Edinburgh (TIE), the company overseeing the construction of the trams, said TIE had been forced to stop construction after the consortium working on the project, including Bilfinger Berger, had introduced 'unacceptable conditions' on the work.

The consortium of Bilfinger Berger and German electronics company Siemens was praised as 'world class' and 'best placed to meet Edinburgh's high expectations' by TIE when they were selected for the project in 2007.

Organisations including the Scottish Public Transport Association and green transport pressure group Transform Scotland have called on the Scottish Government to suspend the company's £340 million contract for the M80 road repair deal in response.

The story took a further twist when it emerged that Bilfinger Berger had recently lost £80 million on a project to bold a new road in Norway – the same amount it is now demanding for the work on the trams project.

Cllr Steve Cardownie, SNP deputy leader of the city council, has said he believes there is a 'connection' between the loss on the Norwegian project and the latest demand.

A spokesman for Bilfinger Berger said: “As the client failed to meet contractually agreed conditions and as no agreement has been reached on the resulting additional costs, construction work in Princes Street cannot yet commence.” The company refused to comment on the allegations of a link to losses incurred on the Norwegian project.

Des McNulty, transport spokesman for Scottish Labour, said: “Taxpayers have a right to accept that contracts signed in good faith will be honoured, without more money being demanded from the public purse.”

Despite the fact that no construction work will take place until the dispute is resolved, which may take some time given the likelihood of legal action, Princes Street will continue to be closed to all traffic.

Previous delays to the trams scheme have resulted in angry scenes between workers and local traders worried about loss of revenue due to road closures, including one incident in October 2008 that ended in a mass brawl after workers attempted to break up a traders' 'birthday party' for a hole in the road.

The tram project, worth a total of £512 million, has already been scaled back due to the financial turmoil, with the planned 'phase 1B' spur from Haymarket to Granton shelved for the forseeable future to conserve funds for the main line to Edinburgh Airport.