Operator Centro has awarded the deal in the latest stage of a £127m expansion of the network between Birmingham and Wolverhampton.

Balfour will start work early next year to build a fast link between Birmingham’s two major rail stations.

The Balfour team will now work with Centro to finalise the design and construction proposals.

Centro’s Chief Executive Geoff Inskip said: “This is a prestigious project in the heart of Birmingham and it demands a construction partner of exactly the pedigree and calibre of Balfour Beatty.

“We worked with Balfour Beatty last year when they built the Metro bridge for us over Great Charles Street. That was a clear demonstration of their proven track record in delivering projects on budget and on time.”

Bill Gifford, Regional Managing Director for Balfour Beatty Civil Engineering, added: “We are delighted to be working with Centro to help deliver this important scheme for the city.

“We have built an excellent relationship with Centro which will continue and help ensure the successful delivery of this prestigious scheme.”

The extension will see trams follow a route from the existing stop at St Paul’s via a new Snow Hill stop and then along a £9m viaduct already built by developer Ballymore.

It will then go down Upper Bull Street, Corporation Street and on to Stephenson Street, stopping outside a new entrance at a rebuilt New Street Station.

The extension is scheduled for completion in 2015.

Morgan Sindall has already begun work on a £13m extension of the Metro maintenance depot at Wednesbury and other elements of the £127m project include platform modifications on the existing line.