Construction industry ‘not in a fit state’ to deliver HS2, says official review author

The man behind a damning review of the failure of government to manage the rising cost of the HS2 build programme has called for a wholesale “regeneration” of the construction sector to deliver major projects.

James Stewart, former chief executive of New Labour PFI quango Partnerships UK and now chair of infrastructure consultant Agilia, told Building the construction industry was “not in a fit state” to deliver a project of the scale of HS2.

Stewart, whose report on HS2 was published yesterday as the government revealed another two-year delay to the troubled mega project’s build-programme, called on the government to take a “pro-active role” in building up industry capacity, arguing that the approach of the previous administration had not worked.

Yesterday, transport secretary Heidi Alexander delayed completion of the HS2 line from London to Birmingham to 2035 at the earliest and revealed the new HS2 Ltd chief executive, Mark Wild, had told her the current overall project “in terms of cost, schedule and scope is unsustainable”.

The cost of HS2 phase 1 to Birmingham – later phases were cancelled in 2023 – has ballooned from a 2013 estimate of £21.9bn to anything between £45bn and £57bn today, Stewart’s review says.

The review, completed in January but only published now, blames the delays and cost escalation on a combination of factors, from constantly changing political decision-making and poor governance, to poorly procured civils contracts and a desire to prioritise speed of delivery over cost.

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While his report is scathing in its assessment of HS2 Ltd’s performance and government oversight, the industry does not escape blame for the rising costs of the civils works.

His report says: “The supply chain also has to take its share of the responsibility as it has largely failed to deliver under the partnership agreements and contracts it signed up to. Therefore, the MWCCs [main works civils contracts] are a collective failure.”

Stewart told Building: “You have to conclude that the construction industry and the supply chain was just not in a fit state to take on HS2.

“It is under capacity and not structured right. The bottom line is it didn’t have the capacity to absorb civil works projects of this scale.”

He said government and the National Infrastructure and Service Transformation Authority (NISTA), the government’s new infrastructure policy and delivery agency, needed to learn the lessons of the failure to build the sector’s capacity through the approach of the previous government, which published a pipeline of public projects but didn’t actively manage the market.

He called for a new construction strategy, and the appointment of a specific minister with responsibility to deliver the government’s Infrastructure Strategy, published later today.

“NISTA has to take some responsibility to regenerate the whole construction market across the UK,” he said.

“This means being more pro-active, encouraging firms to invest. Yes, we’ve produced a pipeline of jobs but on its own that hasn’t had the desired effect.

“The first thing you’d do is look at the fact there’s no construction strategy at the moment.”

His review concluded that “the importance of the Infrastructure Strategy to the UK merits the appointment of a specific minister. This minister could cover Infrastructure and Construction and be supported by NISTA.”

The report also called on NISTA to carry out a review of the construction sector, focusing on bringing in more capacity at tier one level.

The government said yesterday that it accepted “all recommendations” from Stewart’s review but didn’t say exactly how it will carry out each of the 86 individual recommendations in detail.