There is now just one bidder for the Merseytram scheme

Serco said it was concerned about Liverpool City Council's reservations about the proposed route of the line.

The council had said one line should be extended to John Lennon Airport but later said its views should be ignored if they would jeopardise the project.

Serco's decision means the M-Tram consortium has pulled out leaving only The Met bid to be considered.

The M-Tram consortium includes Serco, Mitsubishi and Nedrail.

The letter announcing their decision not to bid for the tram scheme was produced at a meeting of Merseyside Labour MPs and councillors.

'Risk too high'

They met to voice their concerns about the Liberal Democrat leadership of the city council.

In the letter, Serco said: "The city's recent calls, so late in the day, for JLA (John Lennon Airport) to be included in Line 2 give rise to major concerns and we now consider the project risk too high to continue.

"We remain fully supportive of the development of a tram system for Merseyside in any alternative solution where Serco could use its light rail expertise together with the current Merseyrail operation."

Problems began four weeks ago when the council proposed a new route based on a hybrid of the planned lines - number 2, which ends at Whiston Hospital, and 3 that ends at Liverpool John Lennon Airport.

'Too late'

Instead part of the current line 2 would be replaced and the proposed new route would then be diverted to the airport.

Merseytravel - the transport authority for Merseyside - had told the council it needed to reconsider its proposal as it was too late to change the plans after each consortium had spent 12 months working on them.

On Wednesday, councillor Peter Millea, executive member for regeneration, said: "The city council has always believed that the transformation of Speke/Garston means that there is an economically strong case to complete the line to the airport.

"It is one of the poorest wards in the country and the link to the city centre would allow local residents to access jobs in the city centre and provide a fast link for the millions of tourists who arrive at the airport from all over Europe.

"The business community wants this link, but if our response to Merseytravel's consultation is in the way of the overall scheme, we will stand aside."