Edinburgh Trams recorded its highest-ever passenger numbers and revenue in its most recent financial year, and still managed to lose £9 million. That is not a riddle. It is a structural fact about how the city chose to fund one of the most politically painful infrastructure projects in Scottish history, and the bill is still being paid, quietly, year after year.
The bulk of that operating loss comes from a debt repayment charge levied by the City of Edinburgh Council on the tram company itself. Councillor Stephen Jenkinson confirmed as much, stating that "the annual charge the council levies on the tram company to pay down the debt makes up the lion's share of the operating loss." In other words, the network is not operationally broken. It is carrying the financial hangover from a project that ran catastrophically over budget, eventually costing around £776 million against an original estimate closer to £375 million, according to the Audit Scotland report that dissected the original project's failures.
This matters beyond the tram sheds. The City of Edinburgh Council is the same body that sets business rates supplements, allocates infrastructure spending, and manages the financial environment that Edinburgh's 30,000-plus registered businesses operate within. When a significant liability sits on the council's balance sheet, it constrains what the authority can do elsewhere. The Scottish Fiscal Commission has consistently noted that local authority fiscal headroom in Scotland's cities is tighter than it appears on the surface, and legacy infrastructure debt is a core reason why.
The tram network extension to Newhaven, which opened in 2023 after its own delays and cost pressures, was designed to drive exactly the kind of passenger growth that has now materialised. That growth is real, and it is commercially significant for the businesses along the route, particularly in Leith and the waterfront corridor, where footfall has increased meaningfully since services began. The Edinburgh Tourism Action Group has pointed to improved connectivity as a factor in visitor dispersal beyond the Old Town, which is precisely what the city's economy needs.
The harder conversation is what happens next. Record revenue is encouraging, but if the debt charge structure means the company cannot return a surplus regardless of commercial performance, then the incentive model is broken. A tram network that serves more people every year, generates more income every year, and still posts a nine-figure loss is a communications problem as much as a financial one. For Edinburgh's business community, the question worth asking is not whether the trams are performing. They clearly are. The question is whether the council's accounting structure is making viable public assets look like liabilities, and what that does to long-term investment decisions for the city.