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HS2 costs could hit £106bn, warns official review

The Financial Times logo The Financial Times 19/01/2020 Gill Plimmer and Jim Pickard
RPA57T Work begins on building the HS2 High Speed rail terminal in the centre of Birmingham © Provided by The Financial Times RPA57T Work begins on building the HS2 High Speed rail terminal in the centre of Birmingham

The cost of Britain’s new HS2 high-speed rail project could rise to as much as £106bn, according to an official government review which gives only lukewarm backing to the project.

The review, seen by the Financial Times, says there is “considerable risk” that the scheme’s price will rise as much as 20 per cent beyond the £81-£88bn range set out in a report by the current  HS2 chairman Allan Cook last September.

The review led by Doug Oakervee, a former chairman of HS2, also recommends that work on phase 2 of the project from the West Midlands to Manchester and Leeds be paused for six months for a study into whether it could comprise a mix of conventional and high speed lines instead.

“On balance”, it says that ministers should proceed with the 250mph railway, which would stretch from London’s Euston station to Birmingham in its first phase and then to Leeds and Manchester by 2040, seven years later than the original target. But although the final draft of the review recommends that the project should proceed, this is subject to “a number of qualifications,” it says.

“Further work” is needed to assess the scheme’s impacts on regional growth and it is “hard” to say what  economic benefits will result from building it. HS2 would need to be accompanied by investment in local transport and “transport investment alone will not ‘rebalance’ the UK economy,” it adds.

A HS2 sign near the village of South Heath in Buckinghamshire where the high speed line will pass through the Chiltern Hills. There are growing fears the railway cannot be built to its current specification within the ??55.7bn budget. (Photo by Steve Parsons/PA Images via Getty Images) © PA Wire/PA Images A HS2 sign near the village of South Heath in Buckinghamshire where the high speed line will pass through the Chiltern Hills. There are growing fears the railway cannot be built to its current specification within the ??55.7bn budget. (Photo by Steve Parsons/PA Images via Getty Images)

Boris Johnson, the prime minister, is expected to make a decision within weeks on whether to proceed with construction on the first phase of  Europe’s largest infrastructure project.

But Grant Shapps, transport secretary, said last week that he has had to “ask for more details and figures” after identifying crucial gaps in the final draft of the Oakervee report. The National Audit Office is also due to release the results of its investigation into the project by the end of this month.

Mr Johnson has long been a critic of HS2, which is unpopular among some sections of the Tory membership. But the prime minister is a big fan of large infrastructure projects and has made boosting growth in newly won constituencies in the north of England and midlands a driver of economic policy.

The scheme also has strong cross-party support from civic leaders and business in the north and midlands.

When running for the Tory leadership last summer Mr Johnson said: “I worry about cancelling a big national project of that scale without anything else to replace it.”

Although construction of the first phase of the line to Birmingham is expected to start in the spring, should the project get the go-ahead, “the review considers that significant progress is needed to ensure that HS2 is ready to manage the construction stage of phase one,” it adds.

Construction work at Old Oak Common, in west London, where underground platforms for HS2 will link with Elizabeth line (Crossrail) trains, to Heathrow and central London. (Photo by Aaron Chown/PA Images via Getty Images) © PA Wire/PA Images Construction work at Old Oak Common, in west London, where underground platforms for HS2 will link with Elizabeth line (Crossrail) trains, to Heathrow and central London. (Photo by Aaron Chown/PA Images via Getty Images) A number of central issues around construction remain unresolved. Contractors building the scheme have not yet agreed “acceptable” prices for the construction, while the existing design for Euston is “not satisfactory”.

There are also concerns over the project’s management with more scrutiny needed from the Treasury, and its Infrastructure Projects Authority, as well as the Department for Transport. “The review has not seen convincing evidence that HS2 Ltd, especially the phase one construction team, have the level of control and management of the construction normally associated with major projects,” it says. 

The £106bn is the cost of the project put forward to the Oakervee review by Michael Byng, an engineer who wrote the official guidelines on estimating railway costs and used to advise Network Rail.

Savings could be made by having the private sector contribute towards funding HS2 stations, lowering specifications and improving the “cost performance of the management”, the review said. It points out that no other high speed line in the world runs 18 trains per hour and recommends reducing it to 14.

Despite the caveats, the report warns there are no alternative “shovel-ready” projects ready and that, with £8bn spent so far, it should proceed.

The Department for Transport said: “A draft of the Oakervee Report was delivered shortly before Christmas. The transport secretary, chancellor and prime minister will take a final decision on HS2 shortly.”

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