Transport Secretary Ruth Kelly is due to announce almost £400m of government money will be poured into the project.

The redevelopment will aim to ease congestion for 17 million passengers who use the station each year.

Network Rail and Birmingham City Council plan to start work on the project in 2009.

Building work on the first phase should finish by 2011 with the station being kept open while work on the new concourse is carried out.

"This underpins and will drive the economic regeneration of Birmingham and the city region" - Birmingham City Council leader Mike Whitby

The second phase is due to be completed by 2013.

Built in the 1960s, New Street station has been criticised for its outdated look, lack of natural light and passenger congestion.

Regeneration company Advantage West Midlands said it was important to the region's economy that the new station "creates the right first impression" to visitors.

Following the revamp, the new station will have a 10,500 sq ms concourse and be a "bright, modern 21st Century transport hub for Birmingham and the West Midlands region", Network Rail said.

The area around the station will also be regenerated and pedestrian connections across the city centre will be improved.

Prolonged arguments

Passenger capacity at the station will also be doubled while each platform will be accessible via escalators.

Ms Kelly said: "Birmingham is a key gateway to towns and cities across Britain and this investment will make New Street a more enjoyable experience for its passengers.

"This scheme has been in development for some time and has improved immeasurably so that it can now meet the needs of passengers and deliver a much-needed boost to capacity.

"The government is making a major investment in Birmingham New Street and it is now up to Birmingham City Council and its partners to transform this station into one of the best in our country."

The announcement follows prolonged arguments between the city council and the government over who should pay for the station redevelopment.

'Much-needed scheme'

Council Leader Mike Whitby said: "With the support of business, local politicians, and most importantly, the general public, the government has responded to our call for a better station for Birmingham.

"This is not an overnight job. However, from 2011 passengers and the general public will enjoy the first benefits of this transformation."

Iain Coucher, chief executive of Network Rail, said the company was "delighted", adding: "This is a much-needed scheme and is among a raft of projects that Network Rail is looking to take forward to expand and develop Britain's rail network in the years ahead."

Business leaders in the city said the New Street revamp would provide Birmingham with " a great opportunity".

Birmingham Chamber of Commerce chief executive Jerry Blackett said: "Today's announcement marks the end of the beginning for a long-awaited project.

"New Street is a major strategic rail junction for the whole of the country and we expect the scheme will create a national showpiece in the heart of the city."

See also:

Rail station revamp receives £400m boost

Financial Times: February 13 2008
By Jonathan Guthrie in Birmingham

Birmingham's New Street station is to receive £400m of public money - far more than expected - in a revamp that will help appease business and local residents who had long interpreted its decrepitude as a sign of government indifference.

The scheme is expected to give the UK's second-largest city a new rail transport hub to match surrounding regeneration, including the revitalised Bullring shopping district, itself once a byword for urban decay.

Delays to funding of the Gateway scheme, expected to cost £550m in total, had sparked growing irritation among Birmingham business leaders in recent months. This was most acute during celebrations in London over the £800m refurbishment of St Pancras, seen as having relatively little value for people outside the south-east. Redeveloping New Street is an over-riding priority for city figures, who regard it as a poor advertisement for the West Midlands.

Yesterday business groups united to praise the government, as Ruth Kelly, transport minister, announced higher than anticipated public funding for New Street. This reduces the amount development partners Network Rail and Birmingham council will have to raise from the private sector.

The Department for Transport will provide £160m on top of £128m set aside in last year's rail white paper. Advantage West Midlands, the regional development agency, will put up £100m. Ms Kelly said the revamp would make life more comfortable for the 17m people who used the station annually. It would also accommodate passenger growth of 30 per cent over a decade.

The plan is to demolish the Pallasades shopping centre that sits over the station and build new retail space to the south. This will allow the construction of a glass roof, admitting light to the previously Stygian confines of the platforms. The concourse, the site of daily commuter stampedes, will double in size. Two office blocks will be built on either side of the platforms, helping raise employment on the site to 5,000 jobs. Every platform will have escalator access and the station will gain extra entrances and exits, making it a short cut rather than an obstacle to pedestrians crossing the city.

Local Labour politicians will be hoping announcement of the grants will bolster support for them in May's council elections. But the news may also help Mike Whitby, Tory leader of the Conservative/Liberal Democrat coalition that has controlled the city since 2004.

Embroiled in an unconnected pay dispute with council workers, Mr Whitby scrapped station redevelopment plans drawn up under Labour as under-ambitious and pushed for the scheme endorsed yesterday by Ms Kelly. His relationship with Lord (Digby) Jones, who was then leader of the CBI employers' body, was enlivened when he told the council it should "piss or get off the pot" over New Street.

Ms Kelly had originally been expected to sign off the Gateway project before Christmas. Her failure to do so is understood to have been the result of disagreements between the council and Network Rail over which should bear responsibility for particular cost over-runs. John Edwards, chief executive of AWM, said: "We have cost-assessed and value-tested this project to hell and back, and there is now a significant contingency for over-runs."

The New Street revamp is scheduled for completion by April 2014. Until then, image-conscious Brummie business people are likely to continue meeting important visitors at the swankier Birmingham International station on the outskirts

Dream ticket

'We have been waiting for this for five years. Let's get on and build it' Chris Clifford, West Midlands CBI

'This is the end of the beginning for a long-awaited project . . .we expect it will create a national showpiece in the heart of the city' Jerry Blackett, Birmingham Chamber of Commerce

'New Street is currently a vision of the worst aspects of the last century. We need to move quickly to the delivery stage' John Philips, Institute of Directors

'This will be the largest single investment by a regional development agency' John Edwards, Advantage West Midlands