HS2’s latest reset and what could come next for contracts and claims

It is fair to say that HS2 has not gone as planned. Recent reports suggest that it is now expected to cost between £87.7bn and £102.7bn (in 2025 prices), a huge increase on initial estimates of £37.5bn (in 2009 prices). The first services are not expected to run until 2036-2039, despite changes to the programme including cancellation of Phase 2.

However, there are signs that things are getting back on track. The project is now in the midst of its latest reset, due to end next year. It is being overseen by HS2 Ltd’s chief executive Mark Wild, who previously served as CEO of Crossrail Ltd and helped deliver the Elizabeth line in 2023.

From a legal perspective, one aspect of the latest reset worth watching is HS2’s approach to claims. No doubt there will be on-going claims for costs incurred as a result of delays before the reset. There may be political as well as commercial pressure to resolve these quickly. Similarly, if the reset is intended to provide a clean break, HS2 may seek to resolve historic claims sooner rather than later so the focus can return to delivery.

Global settlement

One option could be a global settlement, dealing with all outstanding claims under a single agreement. Similar approaches have succeeded on other projects. However, the commercial or political appetite to pursue that route may be lacking, particularly given the likely number of parties involved and sums at stake. Any such settlement is unlikely to capture claims further down the supply chain, but the major contractors may well resolve matters with their suppliers before striking a deal with HS2. Those that do not may come to regret any global settlement if they are unable to reach similar terms with their supply chain.

Earlier this year, in a statement to the House of Commons, the secretary of state for transport said that two-thirds of the rise in HS2 costs is “down to past misunderstanding of the work required, underestimation and inefficiency – issues within the control of HS2 Ltd, some of its suppliers and previous governments”. This suggests some responsibility for previous delays is viewed as resting with HS2’s suppliers, increasing the prospect of claims. HS2 is unlikely to take a passive approach where it believes it has a legitimate cause of action.

HS2’s claims strategy will largely depend on how its contracts with the supply chain allocate responsibility for change and delays. Some contracts are more detailed than others in this regard and require a more proactive approach. For example, the NEC’s compensation event regime and the JCT’s relevant events and relevant matters carry administrative requirements. HS2, and members of its supply chain seeking to pass down liabilities to other suppliers, will need to ensure they comply with their contractual obligations. This will be essential to preserving any rights they may have in relation to claims. 

Claims analysis

The claims strategy will also be informed by the parties’ analysis of the reasons for the delays and the extent of their impact on the project. This can be a difficult and contentious exercise, especially if there are concurrent causes or disputed facts, or where there is conflicting evidence. Commercial and legal teams need to work together to understand what happened and why, so that decision-makers can choose whether to pursue a claim, defend, or to settle.

HS2 will also need to consider what should happen if the project faces further delays or price rises. This is another issue to address sooner rather than later, with the renegotiation of supply chain contracts forming an important part of the reset. There will be points to negotiate in relation to liability for additional costs, programme impacts arising from any future delays, and any changes to the scope. Prolongation and price escalation clauses, force majeure and liquidated damages are all likely to be on the agenda.

At the time of writing, HS2 has already announced the successful renegotiation of contracts with two of the civil engineering joint ventures delivering parts of the route.

Ultimately, everyone wants the best result for the UK and its construction industry. That means demonstrating that, as a sector, we can deliver major infrastructure projects on time and within budget. Managing delivery, proactive contract management and the timely resolution of disputes all play a key role. With that in mind, let’s hope this latest reset proves successful. Whatever the outcome, the next phase of HS2 will provide valuable lessons for employers, contractors and consultants across the industry.

Antony Smith is chair and a partner at Beale & Co, where James Hughes is an associate