AFTER months of media speculation over the future of the High Speed 2 project, Britain’s secretary of state of transport, Mr Mark Harper, announced on March 9 that, in order to reduce costs, Phase 2a from Birmingham to Crewe would be delayed by two years and that completing the line between Old Oak Common and Euston in London would also take place later than planned.
In the last six-monthly report to parliament on HS2, published on October 27 2022, Harper had said that the forecast start of initial services from Old Oak Common to Birmingham remained “within the range of 2029 to 2033,” with Phase 2a still “on track to be delivered between 2030 and 2034” as land acquisition and enabling works were underway. The date range for delivery into service of Phase 2b “remains 2035 to 2041”, Harper said, as set out in in the strategic outline business case.
Project delivery company HS2 Ltd had informed the Department for Transport (DfT) that its future spending forecasts indicated that the final delivery cost of Phase 1 was likely to exceed its target of £40.3bn, at 2019 prices. In September 2022 DfT commissioned HS2 Ltd to take action to bring projected costs back in line with this target. At that time, £18.3bn of the £40.3bn had been spent, while HS2 Ltd had drawn £1.5bn of its £5.6bn delegated contingency for Phase 1.
HS2 Ltd was projecting around £1.9bn of “net additional cost pressures” on Phase 1, including £1.1bn to pay for additional main civil works that could be required due to lower than planned productivity and additional design costs. The cost estimate for the HS2 station at Euston could increase by a further £400m, but DfT expected that the change to “a smaller, less complex 10-platform single-stage delivery strategy” would address some of this cost pressure as a revised station design was developed.
Harper also reported a pressure of £300m against HS2 Ltd’s budget for changes to Network Rail infrastructure at Euston and Old Oak Common required for the new HS2 stations at these locations.
These cost pressures had been partly offset by £800m of net savings and efficiencies identified within Phase 1, across the main works civils portfolio and from the acquisition and resale of land and property. HS2 Ltd’s estimate of the likely financial impact of the Covid-19 pandemic remained within the range of £400-700m.
Back in October, the budget for Phase 2a remained unchanged at £5.2-7.2bn, with Phase 2b expected to cost between £13bn and £19bn.
On March 9 Harper said that the government had already spent over £20bn on Phase 1 and was now prioritising initial HS2 services between Old Oak Common and Birmingham Curzon Street “to provide delivery of passenger benefits as soon as possible.”
“We remain committed to delivering HS2 services to Euston, and will address affordability pressures to ensure the overall spending profile is manageable,” Harper said. “We will therefore take the time to ensure we have an affordable and deliverable station design, delivering Euston alongside high-speed infrastructure to Manchester.”
Harper said that the legislation necessary to build Phase 2b, the High Speed Rail (Crewe - Manchester) Bill, would continue through parliament.
“The government is committed to delivering HS2 Phase 2a between Birmingham and Crewe,” he said. “We have seen significant inflationary pressure and increased project costs, and so we will rephase construction by two years, with an aim to deliver high-speed services to Crewe and the northwest as soon as possible after accounting for the delay in construction.”
Harper’s written statement was issued shortly before the House of Commons finished its business for the weekend, and an apology for this “discourteous” timing was made by transport minister, Mr Huw Merriman, to MPs on March 14.
Merriman said that the government was spending £600m a month on the construction of Phase 1, which is now at its peak. Construction inflation had reached 15% “which is why we have an issue with costs,” he said. It was within the requirements placed on HS2 Ltd to ensure that where there are inflationary pressures, “it fills the gap by bearing down on costs.”
On the revised construction schedule, Merriman said “we will not proceed with construction at Euston in the next two years, due to affordability and profiling issues, but we will use that time to work with partners to ensure an affordable and deliverable design.”
Speaking in the debate that followed, shadow transport secretary, Ms Louise Haigh, referred to a leaked document written by senior DfT officials. According to the document, delaying construction will increase costs, cost jobs and risk putting construction contractors out of business.
Haigh added that the DfT document could not rule out abandoning plans for high-speed services to Stoke-on-Trent, Macclesfield and Stafford altogether, and suggests that HS2 could terminate at Old Oak Common until 2041.
“The government needs to avoid being penny wise and pound foolish, as delays don’t necessarily lead to savings, and in fact can drive costs upwards.”Patrick McLoughlin
Merriman declined to comment on the leaked document, which was also seen by The Guardian. It reported that the internal DfT briefing said that construction will not be continued at Euston “for the next two years,” with the site made safe and design teams demobilised.
Design of HS2’s new station at Euston is being led by a consortium of Arup, Grimshaw, WSP, Haptic and LDA Design. Architects’ Journal reported that Grimshaw has been instructed to stand down its 90-strong design team.
“We are currently focusing on mitigating the impact that delay has on our people and our practice, and we have had to take the difficult decision to start a redundancy consultation process,” a Grimshaw spokesperson said.
“We are working through the potential impact of the pause to the Euston station design scheme,” an Arup spokesperson said. “Our immediate priority is to redeploy colleagues where we can to other projects.”
A spokesperson for WSP said the company was working closely with its client to consider “any impact” of Harper’s announcement on project resourcing.
HS2 Ltd told IRJ that the latest design phase for Euston station has been substantially completed by its contractors as scheduled. Delivering the new station alongside infrastructure to Manchester will allow time to ensure that the design is affordable and deliverable, and further instructions will be issued by HS2 Ltd in due course.
Responding to the Harper’s latest statement, Mr Darren Caplan, chief executive of the Railway Industry Association (Ria), said “it is clearly disappointing to hear of this delay, which seems to prioritise short-termism over a structured, long-term strategy for what is Europe’s biggest infrastructure project.”
“This stop-start approach to a project is an inefficient use of taxpayers’ money, and could ultimately drive the project’s costs up, which is the opposite of what the government is trying to do.”
Mr Andy Bagnall, chief executive of Rail Partners, said that “while inflationary pressures make infrastructure projects more challenging, it is critical for Britain’s economy and meeting net-zero targets that large sections of HS2 are not delayed which will ultimately increase the overall cost.”
“This is a disappointing announcement,” said former transport secretary Lord Patrick McLoughlin, now chair of Transport for the North (TfN). “But I was reassured by the transport secretary that we are still getting HS2 to Manchester.”
“However, it needs to be understood whether or not these cost savings can be realised while still achieving the same desired outcome and conditional outputs. The government needs to avoid being penny wise and pound foolish, as delays don’t necessarily lead to savings, and in fact can drive costs upwards.”
For the Institution of Civil Engineers (ICE), Mr Jonathan Spruce, trustee for policy and external affairs, said that “public infrastructure projects like HS2 are critical for economic growth, and meeting levelling-up and net-zero goals. They are an investment in our future, not a cost.”
ICE director of policy, Mr Chris Richards, added that “there is global competition for talent, resources, and know-how.
“Delaying major programmes like HS2 won’t result in cost reduction,” he said. “In fact, Britain’s ability to deliver projects effectively may become more difficult as construction firms shift their focus to other countries.”