Ailing project may need millions in extra funding

to finance the loan itself, Sheffield would have to pay out £530,000 a year from 2010/11. The council would also be liable for 17 per cent of any shortfall in Digital Region’s operating costs.

The four authorities said in a joint statement that they are “providing flexibility” to Digital Region around the repayment of loans.

They also confirmed they are assessing exactly how much “additional financial support could be made from each of the councils, in the light of the current position.”

A spokeswoman for Rotherham said Digital Region has not yet defaulted on its loans, and that the councils have not yet put any additional money into the project – but “would consider doing so if this made best financial sense”.

She confirmed Rotherham could now make up to £270,000 available “in the short term”.

The scheme’s financial difficulties also call into question the likelihood of the superfast service being extended to more rural parts of South Yorkshire – a key part of the scheme’s original remit.

Project managers had initially promised the new fibre-optic network would reach 97 per cent of homes and businesses by 2012.

However, this target had to be scaled back to 80 per cent last year due to a shortage of funds, with Digital Region’s then chief executive David Carr admitting that initial revenue forecasts had been “over-emphasised”.

He said the network would still eventually be extended to rural areas – but only once it has earned sufficient profits to do so.

Leadership issues continue to beset the project, meanwhile, with Mr Carr having departed his £100,000-a-year post last month.

It means Digital Region is now hunting its third chief executive inside two years, following original chief David Holt’s abrupt departure in May 2010.

Newly-appointed chief operating officer David Cowell issued a statement on behalf of the firm, saying it had made “considerable progress” in a “competitive market” over recent years, and its focus “will now shift to promoting the network and meeting its operational needs”.

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