The final business case for the Edinburgh trams extension to Newhaven has revealed the cost could reach £207 million.

The potential hike is £42m more than the previously cited £165m, and includes a contingency fund. It will be discussed by Edinburgh councillors today.

Edinburgh City Council said the FBC "sets out the robust strategic, economic, financial, commercial and management case for taking trams to Newhaven" and outlines the project cost and timescales on which councillors can base their decision when it goes to council on March 14.

The project team has followed best practice for major capital projects from both HM Treasury and Scottish Government and, after a thorough tendering process, the FBC outlines that the project can be delivered within a budget of £196m, the council added.

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This figure includes an additional risk allocation as well as funding to support local business through the construction process.

HeraldScotland:

It said when the recommended 6 per cent level of "optimism bias" is added, which would take the project total to £207.3m, the project "remains affordable and self-financing and would not divert funds from other council services".

The project would be funded through future tram fare revenues, along with a special dividend from Lothian Buses.

The number of passengers projected to use the system in year one is close to 16 million, almost double the patronage forecast for the existing Airport to York Place line in the same year.

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The cost reflects the outcome of a comprehensive procurement exercise and the inclusion of a six-month ‘Early Contractor Involvement’ (ECI) period to allow the project team and the appointed contractor to refine the construction programme and approach.

The original route went more than £200m over budget and came into operation three years late.

HeraldScotland: Edinburgh City Council group leader Adam McVey. Photograph: Gordon Terris

Council Leader Adam McVey, above, said: "The Final Business Case before us now is the result of a huge amount of work by the project team to produce a strong business case for taking trams to Newhaven which – crucially – does not divert funding from other council services.

"Having developed the case further and gone through the tender process, we now have much greater certainty of the total project cost – following industry guidance, learning the lessons from the previous project and taking a thorough, diligent and prudent approach to risk management.

"We will work to make sure the timelines and costs in the final business case are met."

HeraldScotland:

He said: "All successful major infrastructure projects depend on extensive scrutiny and this major project is no different.

"All ouncillors will be taking the opportunity to examine in detail the FBC and associated documents in detail so that we can collectively make as informed a decision as possible come March 14.

"If council moves ahead with this project, we’ll be working hard to make sure we deliver this project on time, on budget."

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Royal Bank of Scotland is set to book its second consecutive year of annual profits next week, providing further impetus for the Government to continue selling down its stake in the lender.

A consensus of City analysts is forecasting the bank will see bottom line profits nearly double from £752 million last year to £1.4 billion when it reports.

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Nationwide Building Society has reported a fall in third quarter profits as it continues to count the cost of writedowns and investment in technology.

Statutory profit in the nine months to December 31 fell more than 20 per cent to £703 million, which it put down to £167m of "asset write-offs and additional technology spend".

Underlying profits were down by 21% to £691m.

Last year, Nationwide announced a £1.3bn technology investment as it looks to take the challenge to digital rivals.