A report will be considered by Edinburgh Council’s transport and environment committee on September 4 and then by the council on September 21.

“The report will set out the case for completing line 1A from York Place to Newhaven and seek approval in principle for the Outline Business Case (OBC) and authority to enter into a procurement exercise to identify a potential contractor for the project,” said Edinburgh Council.

“A final decision on whether to proceed and with which contractor would then be made in autumn 2018.”

If the project goes ahead, the construction will take three years and, allowing for testing, passengers could expect to use the service in the first half of 2022.

The estimated cost of the project is £165.2 million.

A business compensation scheme could be introduced for local traders during construction.

Council Leader, councillor Adam McVey, said: “As the fastest growing city in Scotland, and with our existing system nearing capacity, we have to look at ways of enhancing our public transport system.

“The planned tram extension route takes in Scotland’s most densely populated area and, taken with low car ownership, developing high capacity transport to Newhaven would bring a range of local benefits in terms of boosting economic growth, creating jobs, enhancing accessibility, reducing congestion and improving air quality.

“We’re now working to make sure that the business case is as robust as possible to ensure we have confidence that the project can be delivered on time and on budget.”

Transport Convener, councillor Lesley Macinnes, added: “Only yesterday, we were named the UK’s best city for transport links, demonstrating the success of our continued work to deliver a truly integrated public transport system for the Capital.

“We cannot be complacent, though. We must ensure we keep investing in public transport and sustainable travel, both to cater to ever greater numbers of residents and visitors and to improve our environment.

“The Outline Business Case demonstrates good early performance for the tram, with patronage expected to double in the first year.

“Crucially, however, it also shows Lothian Buses continuing to operate at the high standard of service we’ve come to depend on.

“We have the opportunity now to study the numbers in more depth before deciding on whether to progress, taking into account the needs of the city’s tax payers, and ensuring we learn lessons from the past.”