The proposed £127m extension to Birmingham’s Midland Metro tram system got initial funding approval from the government yesterday.

This means the Department for Transport expects to fund the scheme, which will run from Birmingham Snow Hill station to New Street station, dependent on the availability of funds.

The extension is expected to boost the regional economy by £50m a year and create up to 1,300 jobs.

It is being planned jointly by Centro, the region’s transport authority, Birmingham City Council and the Black Country councils.

The trams will follow a route from the existing Metro terminus at Snow Hill, along a £9m viaduct already built by developer Ballymore, stopping outside a new entrance at New Street Station.

The project will also bring the construction of a new maintenance depot at Wednesbury and platform lengthening at existing Metro stops.

Mike Whitby, leader of Birmingham City Council, said: “Operating alongside the £600m New Street Gateway, the airport extension, High Speed Rail, our £2.7bn highways Pfi, and improvements to bus services and secondary rail services, Metro will play a key role in making the city more accessible to residents and even more attractive to the global investors that are already noticing Birmingham’s potential.”

• University College Birmingham plans new campus
• Birmingham gets new regeneration head in reshuffle
• Emergency Budget: Growth fund to guarantee Brum’s New Street
• Birmingham plans £40m IT research centre
• High Speed 2 sends Birmingham back to drawing board