It’s been beset by delays, cuts and uncertainty. Now the curtain is set to come down on swathes of HS2 as the prime minister seeks to curtail costs.
Today Rishi Sunak will announce plans to scale back HS2 by scrapping the northern leg between Birmingham and Manchester. He is said to be “stunned” by the overruns and wishes to invest “every penny” saved elsewhere on other transport projects in the north and the Midlands. How has a project priced in 2009 at £32.7 billion soared to more than £100 billion?
Supporters say that delays, environmental surveys, inflation, Brexit and the pandemic have made costs soar. Opponents claim that the line was always over-designed, that HS2 Ltd, the government-owned company tasked with delivering the project, lost control of contractors and that it all turned into a massive gravy train for highly paid bosses.
How much has the cost of HS2 increased?
When HS2’s costs were first announced in 2010, the initial budget for the project — then envisaged as Y shaped line stretching from London to Birmingham, Manchester and Leeds — were forecast to be “in the region” of £30 billion. The figure, it was suggested, was a conservative one, factoring in risk and the fact that the costs would be spread over 20 years or more.
Even by the 2015 general election ministers had to confess that the initial estimate was a woeful understatement. By then the bill had risen to £55 billion, despite elements of the original scheme being dropped. Critics say that the £32.7 billion figure should never have been publicised, citing other projects, such as the 2012 Olympics, as examples where the initial cost was misleading.
Today, according to recent estimates, that figure has been dwarfed despite the eastern leg of HS2 to Leeds having been ditched. According to recent estimates, adjusted for 2022 inflation figures, the cost of HS2 now stands at as much as £92 billion. Further cost overruns on the first phase of the project could take the overall spending envelope to more than £100 billion.
Where have costs risen?
The biggest increases in costs have been in the first phase of the project, from London to Birmingham. In January 2012 they were envisaged at £21.6 billion in 2022 prices, but have since more than doubled.
Overall, the cost of civil engineering for the London to Birmingham phase rose by £5 billion between 2017 and 2019, accounting for almost half of the cost increase on this part of the line. It is now expected that this phase will in total cost more than £44.6 billion, surpassing even the worst forecast. A report by the Policy Exchange think tank last year estimated that, at 2022 costs, it is possible to save about £3 billion a year by 2027-8, and £44 billion or more in total if Sunak cancels all sections where main construction has not yet started.
By October 2022 those figures had risen to more £50.5 billion. According to internal estimates those costs have risen by about a fifth again, which would take the overall cost of the first phase of the project to more than £60 billion.
Other costs have also risen sharply. The cost of Phase 2a of the project, from the West Midlands to Crewe, has risen from £3.3 billion in 2022 prices to £8.3 billion, while Phase 2b from Crewe to Manchester will cost an estimated £21.8 billion.
Why have the costs risen so much?
There are myriad reasons — some of which should have been foreseen and some of which could not have been.
The first was the specification. HS2 was originally envisaged to operate more trains an hour and higher speeds than any comparable high-speed line elsewhere in the world. It has been estimated that this pushed up costs by about 10 per cent.
Secondly, when detailed construction surveys were carried on the London to Birmingham section of the line, engineers discovered that ground conditions were poorer than had been expected, and that they would have to undertake more structural reinforcement before laying the tracks.
Critics say that some of this could have been avoided by having a slower railway. The line is designed for a maximum running speed of 240mph, faster than the 180mph widely used in Europe, and this despite Britain being a smaller country.
Experts say that on the longest stretch of line without a station — the 90 miles from Old Oak Common to Birmingham Interchange — trains will barely be able to reach their top speed before needing to slow down.
Supporters blame MPs and the government for dither and delay. They also bemoan the fact that local opposition, notably from Tory MPs in the Chilterns, was instrumental in having the plans largely redrawn with more tunnels, which are hugely expensive.
Passengers for Birmingham will only see daylight for seven minutes on the 45-minute journey.
Environmental and noise concerns over HS2 have forced significant changes to the original specification. The project now includes 25 miles of tunnels and 12 miles of viaducts. A large part of the route will now be built in what is known as cuttings, which means the track is effectively below ground with banks on each side. Very little of this was factored into the original costings.
Finally and most recently, construction inflation, which was at one stage running at about 20 per cent, has impacted on the cost estimates for the portion on the line where building has yet to start. It is this latest increase that is perhaps the most critical element on the rethink.
Delays caused by the pandemic, including social distancing and reduced shift patterns, added to costs while sources said Brexit increased the costs of labour.
Does the business case for HS2 still stand?
When the government launched HS2 it initially estimated that the project would deliver a benefit of £2.40 for every pound of public money spent.
In 2017 this had fallen to £2.30 and in 2019 it had fallen still further to £1.30 and now stands at about £1.10 — including wider economic impacts but without the impact of inflation on construction costs factored in.
Critics of HS2 believe this cost-benefit analysis is still overly optimistic as it assumes that the costs of the railway, when built, will be covered by fares.
Supporters of the scheme argue that the cost-benefit ratio is assessed over a period of 60 years — when the railway has been designed to last for more than 120 years. They also say it does not capture all the tangential benefits of freeing up extra freight capacity on existing lines as well as its contribution to helping the UK hit its net-zero targets.
How important will it really be for levelling up?
HS2 has been portrayed by supporters — from George Osborne to Boris Johnson — as a critical element of the government’s pledge to "level up" the north.
• George Osborne and Michael Heseltine: Scrapping HS2 is economic self-harm
They point out that much of its benefit is in linking cities like Birmingham and Leeds through the midlands as it is starting the line off in London. They also point out that a significant part of future spend on HS2 is for track which will be needed anyway for Northern Powerhouse Rail, which will link Liverpool with Leeds via Manchester.
Yet critics say the benefits of the railway to the towns in the north and midlands — where HS2 will not stop — will be much more limited if not non-existent. They point out that for a fraction of the cost the government could boost economic growth by investing in regional connectivity including new roads and bus routes.
Does it have support among voters?
It would be fair to say that voters are as conflicted as politicians about what to do with HS2. A recent poll by YouGov for the consultancy firm Bradshaw Advisory found that 29 per cent of voters support the construction of HS2 while 39 per cent oppose it with a further 22 per cent not having an opinion either way.
But asked whether the line should stop at Birmingham the results were reversed — with 39 per cent saying it should go all the way to Manchester and 23 per cent saying it should not.
What will happen next?
Now the project is being evaluated again. Having been chopped up by Boris Johnson in 2021, including removing the eastern leg to Leeds, it faced further delay this year. In March, Mark Harper, the transport secretary, said the line north of Birmingham to Crewe would be delayed by at least two years to 2036, while HS2 will not arrive in Manchester until 2040 — if at all.
It is increasingly clear that Sunak will go further and axe the northern portion, and the future of Euston as the London terminus is also in doubt.
Some saw the March announcement as a prelude to the eventual cancellation of the whole of HS2’s northern expansion. It now looks as though that will be the case.
