The company that operates cross-Channel rail services between London, Paris and Brussels may need a �1bn ($1.6bn) government bail-out, it has been suggested.

London and Continental Railways, which runs Eurostar trains and is building the high speed rail link across Kent, has seen passenger numbers fall.

The National Audit Office, the spending watchdog, is to launch a fresh inquiry into the risks facing the taxpayers.

A previous inquiry suggested up to �1.2bn of public money could be needed.

The firm has already had one financial rescue backed by government guarantees.

Financial risk

With passenger numbers less than half the original forecasts and still falling the gap between fares incomes and charges for using the tracks is widening.

Successive governments have always claimed the financial risk lay with the private sector.

The fear is a rescue seen by ministers as unlikely is now looking increasingly likely.

London and Continental won the Private Finance Initiative contract to build the �3bn, 67-mile rail link between London and the Channel Tunnel, and operate Eurostar, in 1996.

When completed the Channel Tunnel Rail Link will enable Eurostar trains to run at full speed from St Pancras station in London to the Kent coast.