A #2.2 billion plan to privatise Birmingham's roads, which has been mired in controversy for four years, is facing a fresh crisis.

One of four consortia bidding for a 25-year PFI contract to improve and maintain the highways network, pavements and street lights has pulled out and a city council union is threatening industrial action.

A consortium led by Balfour Beatty and Mouchel Parkman dropped out of the race earlier this month, leaving only three shortlisted bidders to continue to negotiate with the council.

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And in a move that could bring the PFI to the brink of collapse, 150 members of the Amicus union at the council are balloting for a possible strike. Other unions representing more than 750 staff in the highways department are understood to be considering similar action.

The threat of a walkout by council employees has existed since the highways PFI was first proposed four years ago by the then Labourcontrolled council. Unions fear wage cuts and the loss of benefits once members are transferred to the winning consortium.

The council ? s Conservative-Liberal Democrat leadership attempted to negotiate a deal under which

staff would be sub-contracted to the consortium.

However, such an arrangement is unlikely to meet Government requirements that all financial risk in PFIs must be transferred totally from the public to private sector.

Events in Birmingham are being viewed closely by the Government, which is keen to see the biggest PFI of its type succeed.

Union leaders at the Council-House have rejected promises that the terms and conditions of employees will be protected under the proposed transfer. They say staff affected by previous PFI deals have suffered pay, holiday and pension cuts.

Steve Foster, chairman of the council joint-union PFI committee, said: ?We believe that to privatise the entire road network for a minimum of 25 years would be disastrous.

?The loyalty of private contracting companies is always firstly to the banks and their own shareholders.?

The dispute with Amicus and the threat of action from other unions will delay implementation of the PFI until at least 2008 ? four years later than the original deadline set by the council.

Although the Department for Transport has agreed in principle to hand over #379 million in PFI credits, the offer is dependant on Ministers approving the contract between the council and a private sector partner.

The potential value of the highways PFI is #2.2 billion ? about #800 million more than the council would otherwise have to spend on the roads over 25 years.

The successful consortium will be given seven years to remove a # 170 million repairs backlog and bring the highways infrastructure up to an ?acceptable and affordable? standard.

Councillor Len Gregory (Con Billesley), cabinet member for transportation, remains optimistic.

He said: ?The remaining three bidders ? Amey PLC, Atkins EDF Energy Consortium and Birmingham Street Services ? are key players in highways construction and maintenance.?

Sir Albert Bore, leader of the Labour opposition group, said Coun Gregory?s attempt to ?cuddle-up? to the unions had failed. The Government was unlikely to accept a PFI involving the council subcontracting its workforce to the private sector.