High Speed 2 could deliver a £7 billion return on the Government’s £13.9bn investment, according to a new report by PricewaterhouseCoopers.
Commissioned by independent think-tank Greengauge 21, PwC has produced the first analysis into the financial return if HS2, like HS1, has its infrastructure sold off under a 30-year concession.
Philip Hammond, Secretary of State for Transport, recently confirmed that it is the UK Government’s intention to sell HS2 once built.
HS2 is the proposed 175km line from London to the West Midlands. If and when it sets off in 2026, it will allow speeds in excess of 200 mph and a journey time from London to Birmingham of 49 minutes.
Richard Abadie, PwC partner and global head of infrastructure finance, said: “Given the pressure on Government finances it is important to minimise the financial impact of this investment through asset sales.
“Our report says the Government may be able to sell the infrastructure for between £6bn-£7bn, representing up to 50 per cent of the initial design and construction costs. This will be a key consideration in the continuing affordability debate, not only for HS2, but for the wider high speed network.”
Jim Steer, Director of Greengauge 21, said: “This is a very good up-front return on the £13.9bn construction cost. HS2 is unusual in that it is a transport project that generates very large cash receipts as well as other transport and regeneration benefits that will improve the productivity of the economy, right across the regions, and especially in the Midlands and the North.
“And there are potentially further cash returns over the lifetime of the project,” he added.
“The Exchequer will receive, over time, estimated extra tax receipts on the profits earned by the infrastructure concession holder and rail operating franchises worth £1.5-2bn and, at the end of the initial concession period, HS2 could be sold again, generating a further £1-2bn return to the taxpayer.”
The report, called Delivering a return on Government’s investment, is based on the planning assumptions developed by HS2 Ltd.
In November 2010, the Government completed the transfer of a 30-year concession of HS1 to a consortium for £2.1bn. That line cost about £5.8bn to design and build.