The £16 billion Crossrail project to link east and west London has been given the go-ahead by Prime Minister Gordon Brown after a funding deal was reached.

Construction work is expected to start on the long-awaited scheme in 2010 with preparatory work in 2009. Royal Assent to allow the work to begin is expected in summer 2008.

Mr Brown said: "I believe this is a project of enormous importance not just for London but for the whole country. 

"By generating an additional 30,000 jobs and helping London retain its position as the world's pre-eminent financial centre, it will support Britain's economic growth and maintain Britain's position as a leading world economy. 

"And by delivering quicker journeys from some of the most economically disadvantaged parts of the city to the most economically important, it will support regeneration, particularly in the most deprived parts of our country."

Crossrail is expected to open for service in 2017 linking Maidenhead and Heathrow in the west with Shenfield and Abbey Wood in the east.

It will include new stations at key city locations including Bond Street, Farringdon and Canary Wharf.  

The new route is expected to bring an additional one and a half million people to within 60 minutes of London's key business areas and it is expected to carry 200 million passengers a year.

Ten coach trains will run at a frequency of 24 per hour between Whitechapel and Paddington and new stations will have two ticket halls to ease the flow of people.

The project, which is expected to create 990 jobs for train drivers, station staff, ticket inspectors and depot staff, had been stalled for some time as transport ministers sought to reach a deal over funding.

The announcement followed a week of talks between the Treasury, the Department for Transport and the City. The breakthrough came when the Corporation of London agreed to find £350 million - £200 million from its own funds and £150 million from major City funds.

The unique deal will mean Crossrail is both funded by the Government and the businesses that are set to directly benefit from the link. 

Transport Secretary, Ruth Kelly said: "This announcement paves the way for a rail link that will give a lasting transport legacy to London for centuries to come".

Crossrail will:

• Increase capacity by carrying more than 200 million passengers a year including a 54 per cent increase in rail capacity to Canary Wharf and 21 per cent more to the City.  In total Crossrail will add 10 per cent to London's overall transport capacity.

• Add at least £20bn to the UK economy and support an expected 30,000 new 'high-value' jobs by 2026. Fourteen thousand people will work on the line's construction.

• Ensure the continued and sustainable growth of London as a world finance centre - including the expansion of Canary Wharf.

• Boost existing regeneration plans in the Thames Gateway and elsewhere.

• Improve transport links by complementing existing rail services and providing a direct link with Heathrow - it will take 43 minutes between Canary Wharf and Heathrow.

• Improve transport opportunities for people with reduced mobility with new step-free Crossrail stations in the central section and accessible trains.

• Is expected to be commercially self-sustaining once operational.