Cost of HS2 rail link jumps by £3bn in a month

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The official price tag for the London to Birmingham section of the UK’s HS2 high-speed rail line has jumped by £3bn in just a month, highlighting the continuing issues in containing the cost of the controversial project.

In a statement on Wednesday, rail minister Huw Merriman said HS2’s management had increased the upper estimate for the project to £57bn in 2019 prices.

Just weeks earlier, the transport department had put a price tag of up to £54bn on the London to Birmingham stretch, a big increase from the previous figure of £45bn published in June.

The latest estimate for HS2 comes after Prime Minister Rishi Sunak cancelled what remained of the second phase of the railway from Birmingham to Manchester, citing the ballooning costs of the project and a fall in rail passenger numbers in the wake of the pandemic.

Sunak said the move would save £36bn, which the government would spend on local transport networks in the North and Midlands.

HS2 Ltd, the state-owned delivery body, has already spent just under £25bn on the heavily delayed project, even though work on the London to Birmingham section only began three years ago.

Earlier this week, Nick Smallwood, chief executive of the Infrastructure and Projects Authority, which is part of HM Treasury, said he remained concerned about the costs of the project. The IPA said HS2 Ltd had from the outset underestimated the scale of the design work required.

HS2 was once one of the most ambitious infrastructure projects in Europe. But successive prime ministers have taken the axe to it, including a proposed eastern leg from Birmingham to Leeds, after years of cost overruns and delays. HS2 Ltd has been accused by whistleblowers and MPs of covering up the true cost of the scheme.

When the project was launched more than a decade ago, it envisaged that trains would start running between Euston station in central London and Birmingham by 2026.

Services are now expected to start in 2029 at the earliest from a new station under construction at Old Oak Common in west London. The final few miles of the line and the rebuilt terminus at Euston will take at least another 10 years to complete. Sunak said last month that private developers would pick up the bill for that last part of the project.

HS2 Ltd’s chief executive Mark Thurston stepped down earlier this year under pressure from senior members of the government, according to people familiar with the situation. A new chief is expected to be appointed in the new year.

In his statement, Merriman said HS2 Ltd had attributed the cost increases to “design performance, delivery productivity, consenting delays and a difficult operating environment with Covid-19 and the Ukraine war affecting the supply chain”.

But he also said the government disagreed with the revised cost estimate of between £49bn and £57bn for the London to Birmingham section because it was calculated before HS2 Ltd was “notified of the decision to cancel Phase 2”. He added that the scope and cost of the project would “now be reassessed following the decision not to proceed beyond the Midlands, including the decision to adopt a development-led approach to Euston”.

In a statement, HS2 Ltd said the project was of “unprecedented scale and complexity”, adding that under the leadership of Sir Jon Thompson, who took over as executive chair earlier this year, it was “committed to learning lessons of the last few years and controlling costs”.