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The northern powerhouse faces another hammer blow as ministers prepare to ditch plans to electrify the railway between Manchester and Leeds.
In a move that will spark outrage across Yorkshire and Lancashire, Whitehall officials are understood to have ruled that upgrading the trans-Pennine route to run electric trains, rather than diesel, is poor value for money.
The conclusion is understood to have come from a Network Rail study. The decision last summer by Chris Grayling, the transport secretary, to order hybrid electric and diesel trains for other routes in Wales, the north and the Midlands, had stoked fears that the trans-Pennine project was also doomed.
Insiders said the huge cost of fixing electric cables to the rock of the Pennines, along with raising bridges, has sent the project soaring well above its £290m estimate in 2011.
Business and civic leaders across the north have united in recent months to demand more investment in transport, with upgrading the trans-Pennine line a priority.
It could force another humiliating Commons appearance for Grayling, in which he would have to admit a core policy will not be delivered.
Lilian Greenwood, chairwoman of the transport select committee, said: “Just last week the transport committee reported that there is strong evidence electrification remains the current optimal solution on heavily used parts of the railway and called on the government to work with the industry to reduce costs.
“We noted that regions outside London feel they are not getting their fair share of investment and without government action to directly address this . . . regional disparities will widen.
“ If trans-Pennine electrification is cancelled, people across the north will conclude that the government has officially abandoned the northern powerhouse and any claim of credibility on the environment.”
Ditching electrification would also scupper plans to send freight through the Pennines, connecting docks at Liverpool, Teesport, Immingham and Hull.
The Department for Transport said no decision had been made yet, adding: “We are committed to improving journeys on the trans-Pennine route.”