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Calls for HS2 clarity after claims costs could hit £80bn

The future of High Speed 2 has again been called into question after a think tank estimated the cost of the project could almost double to £80bn, leading to calls for clarity on its true cost and benefits.

The Institute of Economic Affairs said the costs associated with the scheme could shoot up because additional tunnelling or diversions may be required to pacify communities opposed to the scheme and additional transport links to the new railway and regeneration projects could be built in response to it.

But the Department for Transport dismissed the extra cost identified in the report as “unsourced and theoretical”.

Jon Hart, partner at law firm Pinsent Masons, said neither the government nor the authors of the IEA report had fully explained how their numbers added up.

He predicted the debate over the costs and benefits of HS2 would increase in the run-up to the scheme’s hybrid bill going before parliament in November.

The Treasury’s Infrastructure Cost Review: annual report 2012-13 released last month said the cost of the first phase (London to Birmingham) now has a budget of £21.4bn, with an allocation of £21.2bn for phase two.

These figures include a contingency fund of £14.4bn across the scheme.

The IEA’s estimate of costs also included the £7.5bn cost of the trains as well as several transport links to HS2 worth about £30bn, such as links to Heathrow or a new airport, to Crossrail 2, to Liverpool, to Manchester Metrolink tram, tram links to Derby and Nottingham and improvements to Yorkshire’s regional rail network to prepare it for HS2.

But it added that the total bill could “easily be higher” but that the number was subject to “a high degree of uncertainty”.

Mayor of London Boris Johnson said in July that he feared the costs of the scheme could rocket to £70bn.

But engineering consultants pledged their backing to the scheme. Mott MacDonald - which has already won design engineering contracts through the rail project - chairman Keith Howells and Hyder Consulting UK managing director Graham Reid both told Construction News that they had confidence that the project would go ahead.

Mr Howells said he was “pretty confident that it would go ahead and won’t be derailed”, while Mr Reid said Hyder would “support it in any way we can”.

Hyder Consulting was appointed to the engineering services design framework for the second phase of the scheme in January, however its joint venture with Aecom lost out on four design contracts worth £49m covering civil and structural design service last year.

It also lost out on £7m engineering and environmental services deals for each leg of the second phase of the scheme in February.

Mr Reid added that the firm “put a lot of work in and we were unlucky with our bids and when work goes ahead I’m sure we will be in there”.

The IEA report said the choice to build HS2 was not justified by the costs and benefits of the project. It added: “Even the government’s own figures suggest that HS2 represents poor value for money compared with alternative investments in transport infrastructure.”

It said the government appeared to have gone ahead with HS2 for political reasons, including touting it as an alternative to a third runway at Heathrow, and that special interest groups set to benefit from it had a “disproportionate influence” on the decision to proceed.

It said groups lobbying for HS2 included rail and engineering firms, local authorities and transport bureaucracies, which could expect to gain from the scheme.

A DfT spokesman said: “The headline £80bn figure appears to have been arrived at by lumping together transport schemes that are not part of HS2 and in some cases are many miles from the line.

“The report claims a theoretical and unsourced cost of £30bn for these projects, although elsewhere admits many will never be built.”

He argued that rail routes connecting London, the Midlands and the North would be “overwhelmed” unless HS2 was built.

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