Rail minister says price will be lower than delivery company’s latest estimate
Completing the first and now only phase of HS2 will cost between £45bn and £54bn, according to the rail minister.
In his latest six-monthly update to parliament, Huw Merriman outlined the cost pressures that led the government to abandon later phases of the scheme and explained why the Department for Transport (DfT) priced the completed route between London and Birmingham below the latest estimate provided by the company charged with delivering the scheme.
HS2 Ltd currently forecasts Phase 1 to cost between £49bn and £57bn in 2019 prices. At the time of the last update to parliament, it had estimated the completed scheme to cost no more than £45bn.
The government-backed company advised that cost increases had resulted from “a wide range of compounding issues including design performance, delivery productivity, consenting delays and a difficult operating environment with covid-19 and the Ukraine War affecting the supply chain”.
It reported a particularly severe increase in the cost of the main work civils element, with the latest projection showing costs inflating from £21.8bn to £23.4bn (2019).
More than 30,000 people are currently working on the project, the highest number in the job’s history.
But Merriman said HS2 Ltd’s estimated cost at completion had been drawn up before the company was notified of the decisions to cancel Phase 2 and to reduce the scope and adopt a development-led approach at Euston, which were announced by the prime minister last month at the Conservative Party conference.
The rail minister said the government’s own estimate had been made “on the basis of the same data used by HS2 Ltd, but using different assumptions on how much remaining cost risk remains addressable”.
Some of the savings anticipated by the government will likely come from its change in approach at Euston, which saw the number of planned platforms pared back from 10 to six.
The government also decided HS2 Ltd would no longer be responsible for Euston, with a new development company set to be charged with delivering the new station as part of a larger privately-led development.
In his statement, Merriman said government ministers had undertaken “substantial engagement with Euston stakeholders” including a meeting with the Euston Partnership Board, which brings together HS2 Ltd, Network Rail, Lendlease, Transport for London, the Greater London Authority, Camden Council and the West Coast Partnership.
Merriman also noted the concerns raised by local residents in the 25th report by the HS2 independent construction commissioner.
In his latest quarterly report, published last week, Sir Mark Worthington said there were concerns about the “uncertainties created by the pause in works” around the central London site, which had been exacerbated by a lack of clarity around what was happening following the government’s decision to re-phase works by two years.
Worthington said locals were “frustrated and angry at the lack of project clarity and the impact that this might have on their properties and lives”.
“In response to the pause in construction activity at Euston we have commenced work on so-called ‘meanwhile uses’ to determine what can be done to reduce the impact of the pause on the local community,” he said.
The minister also confirmed that the government was looking at whether it could use legislation intended to underpin HS2 Phase 2b to speed up delivery of Northern Powerhouse Rail (NPR).
The government committed £12bn to NPR at the same time it announced the cancellation of later phases of HS2.
But with the former having been designed to share a section of track with the latter, there were concerns about the safeguarding of land on this stretch, which were partly assuaged when legislation for HS2 Phase 2b was included in the government’s agenda for the year.
Merriman said the government would “take the time to consider next steps” for Phase 2b legislation and “whether there is a way to repurpose that to deliver NPR”.