There has been some discussion of options for the second tram route in Central Manchester, for example this from Sharp Edge Trip.
However, the best sollution in my opinion is to use Deansgate. It seems from that I'm not the only one who thinks this would be a good idea. Reading down the comments it seems that one of the City Centre Councillors supports it too.
It makes complete sense to use Deansgate, that road is a write off for motor traffic anyway (as it should be) and particularly uninviting to cyclists and pedestrians. Plus it would allow Cross Street (a popular route for cyclists).
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