A leaked report seen by the Financial Times has found that there is a “considerable risk” that the cost of High-Speed 2 (HS2), the UK’s upcoming high-speed rail, could now cost £106bn.
The line, which is meant to link London to Birmingham via key centres such as Manchester and Leeds, was first estimated to cost £56bn in 2015. However, a few months ago, HS2 chairman Allan Cook warned the sum was likely to increase to between £81bn and £88bn, with the latest report eventually spiralling the estimate to £106bn.
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Alongside warning about costs, the report – which was conducted by former HS2 chairman Doug Oakervee – also made a number of suggestions. These include a call for work on the second phase of the link – from the West Midlands to Manchester and Leeds – to be put on hold for six months to explore more options, and assess whether it could use a mix of standard and high-speed rail.
Additionally, the report said “further work” is needed to assess HS2’s impact on regional growth, and warned that it is “hard” to say what economic benefits will result from building it, ultimately claiming: “Transport investment alone will not rebalance the UK economy”.
Here’s a round-up of the industry’s reactions and stances on the issue.
HS2 still key to revitalising the North
In the aftermath of the review, transport secretary Grant Shapps said the “massive decision” on whether to go ahead with HS2 “needs to be fact-based”.
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By GlobalData“I asked Doug Oakervee to do that report and said to him ‘give me the facts, give me the data, give us the information so we can make a proper informed decision,’” Shapps told Sky News.
“I’ve always approached this from a relatively neutral point of view and that information will help to inform a decision that is best for the whole country.”
Meanwhile, Greater Manchester mayor Andy Burnham described the leak as “quite worrying” though claimed that using conventional lines in the North would be a “second-class option”.
He also told the BBC: “To me, that would be the same old story. [On the section] London to Birmingham, money is no object, and then all the penny pinching is done in the north of England. That would not be acceptable to me, and I’m sure wouldn’t be acceptable to many other leaders across the north.”
Burnham was hardly alone in expecting the project to go ahead. West Midlands mayor Andy Street told the BBC the line “will drive the regeneration of our economies in Birmingham, in Manchester, in Leeds and other cities in the Midlands and the North.
“No government committed to levelling up around the country would possibly turn its back on that opportunity.”
Despite widespread concerns about the link, works on the line have not been halted, with figures showing the project currently uses about £250m a month. Until now, approximately £8bn has already been spent on it.
The first phase of project, between London and Birmingham, is due to open at the end of 2026, with the second phase to Leeds and Manchester expected to be completed by 2032-33.
Once the second phase is complete, Manchester to London journeys would take little more than an hour – down from two hours and seven minutes – and Birmingham to Leeds would take 49 minutes – down from two hours. This would therefore reduce journey times between London and Edinburgh by an hour.
Businesses urge government to get HS2 done
A host of British infrastructure companies has been warning Prime Minister Boris Johnson that scrapping HS2 would cause “irreparable damage” to the sector.
The chief executives of Balfour Beatty, Skanska, Morgan Sindall, Costain, Mace and Sir Robert McAlpine are some of the signatories to a letter to the PM seen by The Times, in which they urged him to approve construction of the full high-speed rail project.
Highlighting the importance of the line in supporting an “industrial renaissance” in the Midlands and the North, the letter said that the government’s commitment to HS2 “demonstrates this country’s ambition to remain at the forefront of global engineering, infrastructure and construction delivery”.
The Rail Industry Association also expressed support for the construction of HS2 and claimed that any hiatus would have a devastating impact on jobs and would risk delaying the infrastructure project by another decade.
In addition, the Northern Powerhouse Partnership director Henri Murison said in a press release that “any failure to seize this opportunity would be a betrayal of the north and the promise of a Northern Powerhouse. Time to level up the country and close the north-south divide.”
Speaking to Railway Technology, the Liverpool Chamber of Commerce chief executive Paul Cherpeau affirms that “investing in HS2 represents an outstanding opportunity to catalyse further economic growth in the Liverpool city region and across the country”.
Cherpeau further explains that “action is needed to enable businesses of all sizes to reignite the country’s stagnating economy and the [recent general] election should be the opportunity for parties to keep their promises on infrastructure improvements”.
“While there can be no blank cheque, cutting the project back would put development and investment plans across the country at risk,” he adds. “We will continue to press for a truly integrated transport plan for HS2 and Liverpool which enhances our attractiveness as a business destination.”
What does the rail industry think of HS2’s recent delays?
While ministers and businesses stood in favour of the project, many had reasons to oppose it.
FairFuelUK founder Howard Cox believes that investing in road transport can be more beneficial compared to the railways – especially the HS2. “The government is now to spend over £100bn getting to Birmingham 20 minutes quicker by rail,” he says, “generating a quarter of the economic benefit that spending the same amount on new roads across the UK would deliver.
‘‘It’s staring everyone in the face, freeing up our motoring economy will benefit the environment and massively boost the economy.”
Elsewhere, risk management firm De-Risk’s Jack Darbyshire claims that complex projects like HS2 must use technology like data-sharing to quicken the process. Mentioning the ongoing barriers with other rail projects, Darbyshire explains: “Consider the Crossrail project, HS2’s small brother – it required a contingency budget that doubled initial projections — from £3bn to £6.2bn.
“Given that 40% of rail projects run over budget, or fail to be completed on time according to the Oxford Global Projects Database, what is happening with HS2 is far from a common occurrence.”
He also believes that the main obstacle in the construction of the project is the lack of effective intra-communication, and that “data-sharing is key”.
“In fact, it is reckoned that the establishing of a multilateral culture of sharing data between megaprojects, if successful, might be the beginning of the end of an era of expensive, over-run, ambitious projects such as this one,” he concludes.
From a financial perspective, Keystone Law asset and project finance lawyer Simon Murfitt believes that the project’s economic benefits are not necessarily straight forward.
“For example,” he explains “whether the final initial investment will be capable of generating its own weight in increased region Gross Domestic Product, over any period, is by no means an easy calculation. In any event it often ignores the current ancillary regional and national economic stimulus benefit of what is a current, ongoing project.”
Although the UK is yet to find a solution to the issue, he concludes, the current situation “does beg the question that if Jerimiah Kingdom Brunel attempted to complete any of his major railway engineering works today in our 24/7 news cycle world, would the same costs and benefit debate be [the same]?”
