THE Government was last night preparing to sound the death knell for a much vaunted upgrade of the East Coast Main Line which could have created thousands of new jobs.

Rail chiefs are expected to announce that plans to double the frequency of services and massively increase capacity will be shelved as part of a clampdown on spiralling costs.

Instead, ministers are likely to approve a far smaller plan designed to alleviate key congestion points.

An official announcement is not due for several weeks, but rail operators are already expecting the worst.

A study carried out for regional development agency Yorkshire Forward last year estimated that the upgrade would create 2,000 jobs and boost the region's economy by £100m a year.

When it comes, the announcement by the Strategic Rail Authority (SRA) will prove a huge blow to the region's economy and disappoint train operator GNER.

Privately, company bosses have already scaled down their expectations.

When GNER submitted its bid for the current franchise, proposals were put forward for a £2bn upgrade which would have seen 140mph tilting trains operating on the route.

The project was to be joint funded by GNER, the SRA and Railtrack, but its estimated cost quickly spiralled and only phase one, the upgrade of Leeds station, was completed.

The growing cost of railway maintenance sparked by the Hatfield crash in 2000 has since placed a squeeze on the budget, with the demise of Railtrack proving the final nail in the coffin.

It went into administration last year and has since been replaced by the not-for-profit Network Rail which has been relieved of financial responsibility for future development.

SRA chairman Richard Bowker has already warned that some major projects may not go ahead as there is a need to regain control of costs.

Last night, GNER spokes-man David Mallender said it was still waiting to hear the SRA's plans. He said: "We are still keen to see the line upgraded so that more trains can run faster."

But a GNER source said: "Increasingly Richard Bowker is looking at how he spends money on major projects as he has not got enough money to go round.

"It has come down to things that can be readily achieved and make an immediate difference rather than the kind of long term grand plan we were looking at before."

The SRA is continuing to look at the possibility of a new high speed North-South link distinct from the East Coast Main Line which would allow trains to travel at 225mph.

It has commissioned engineering consultants to see whether the estimated £6bn cost would be justified.

The draft findings, which are thought to be favourable, have been presented to the SRA, but any plans remain in their infancy.

Meanwhile, the SRA is expected to press ahead with a £8bn upgrade of the West Coast Main Line linking London and Glasgow.

Ernie Preston, secretary of the North-East Rail Passengers Committee, said: "It is disappointing that we are not going to have the high speed improved East Coast Main Line we had all hoped for. But we accept that circumstances have changed and this is the real world."

Rachel Spence, head of policy at the North-East Chamber of Commerce, said: "We would be extremely disappointed if there were not to be any serious upgrade of the East Coast Main Line.

"It is a key arterial route and business in the North-East particularly relies on it for connections to London and South-East."

An SRA spokeswoman said: "Further developments on the East Coast Main Line will be outlined in our strategic plan at the end of the month."