Work will now start on choosing a contractor, which will take three years. Up to 800 employees in the council's Street Force department, who are currently involved in highways maintenance, will transfer to the appointed contractor.

It will then take a further seven years before all roads and footpaths are resurfaced to a high standard.

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Depending on the state of a road, work will range from resurfacing to reconstruction, involving roads, pavements, bridges and trees.

The unprecedented £663.8 million of Private Finance Initiative money includes £79.3 million already promised for replacing or upgrading 80 per cent of the city's 69,000 street lamps. Both jobs will be carried out at the same time to minimise disruption.

News of the award, which includes maintenance for a further 18 years, was announced by Transport Minister Rosie Winterton who confirmed Sheffield had been given the full amount it had requested.

"Better quality roads mean safer and quicker journeys," she said. "This funding will benefit all road users, whether they are motorists, bus users, pedestrians or cyclists. Communities with better roads also attract significant new investment."

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Council leader Jan Wilson said: "I'm absolutely thrilled Labour in Sheffield has been able to work with the Government to achieve this result.

"Sheffielders have constantly told us we have to do something about the state of our roads, and they were right.

"We can finally get cracking on putting the project together - but people will understand we are not going to be able to do it overnight."

The council will kickstart the process with current plans to invest £96m in highways activities, which will include the treatment of 168km of highways and footways.

The bid was submitted to the Department for Transport in 2006 but doubts were expressed about whether the city would be able to receive all it had asked for because of its size and the number of competing requests from other councils.

It is the first major achievement for the council's interim chief executive John Mothersole who oversaw the highways PFI bid from start to finish. He promised work on street lights and resurfacing would be co-ordinated to ensure excavations for new cables are completed before new road surfaces are laid.

He said: "We are going to try to tackle the worst roads first but the work will be spread across the city to ensure disruption does not happen all at once.

"Once complete, we will have a highways network that compares with all the other incredible investment in Sheffield's regeneration."

Mr Mothersole addressed concerns about use of SMA tarmac - made by mixing stones and bitumen together. It leaves a surface layer of tar which is super-slippery for the first few months and has been criticised by motorists' groups on safety grounds.

Traditional material has specially-coated stones rolled into its surface giving it immediate skid resistance, but does not last as long so is not as good value as SMA.

He promised that, where SMA is used, temporary reduced speed limits will be implemented on higher-speed roads to ensure drivers' safety.

Here is the timeline for action to tackle Sheffield's roads:

• 2006: Local Highway Authorities were invited to bid for a share of the £600 million Private Finance Initiative scheme. Eight authorities - including Sheffield - entered a bidding battle


• December 2007: A shortlist of five was announced


• February 2008: Councils were asked to update bids by the middle of the month


• October 2008: Sheffield has seven months to present an outline business case


• February 2009: The process to appoint a contractor will begin, with a final decision in January 2011


• August 2011: Work will begin, and will take seven years to complete


• 2036: roads will be maintained for 25 years

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