Government disagrees with HS2 estimate showing ‘significant’ cost rise

HS2 Ltd calculated in September that building the line between London and the West Midlands would cost between £49 billion and £57 billion.

The Government has announced it ‘disagrees’ with HS2 Ltd figures showing a ‘significant’ increase in the estimated cost of Phase 1 of the high-speed railway (Lucy North/PA) (PA Wire)

The Government has announced it “disagrees” with an HS2 Ltd estimate showing a “significant” increase in the cost of building the high-speed railway.

HS2 Ltd, the Government-owned company responsible for the project, calculated in September that constructing the line between London and the West Midlands known as Phase One would cost between £49 billion and £57 billion (at 2019 prices).

This comes a year after Transport Secretary Mark Harper said this phase “remains within its overall budget of £44.6 billion”.

Rising costs were caused by multiple factors including delays in planning and environmental consents, programme scope changes, and supply chain pressures linked to the pandemic and Ukraine war

HS2 Ltd

HS2 Ltd blamed several factors for the increase, such as delivery productivity, delays obtaining consent for the work, and the impact on supply chains from the coronavirus pandemic and the war in Ukraine.

In a report to Parliament on Wednesday, rail minister Huw Merriman wrote that the latest estimate is “a very significant upwards revision compared with HS2 Ltd’s previous projections”.

He stated that “the Government disagrees with the £49 billion to £57 billion figure for two reasons.”

He explained that the estimate was drawn up before the Department for Transport (DfT) curtailed HS2 last month by scrapping the project north of the West Midlands and dramatically amending plans for Euston, which will cut costs.

The minister also stated that the DfT “makes different assumptions on how much cost risk remains addressable”.

The department’s officials put the estimated cost range for Phase One at between £45 billion and £54 billion.

Mr Merriman wrote that he has asked HS2 Ltd executive chair Sir Jon Thompson to update the company’s estimate considering the revised scope of Phase One, and to explain why the increases “have been so significant”.

A spokesman for HS2 Ltd said: “This is a project of unprecedented scale and complexity.

“Rising costs were caused by multiple factors including delays in planning and environmental consents, programme scope changes, and supply chain pressures linked to the pandemic and Ukraine war.

“With hindsight, estimations made prior to full construction by the Government and HS2 Ltd were overly optimistic and delivery performance did not fully match expectations.

“HS2 Ltd, under the new leadership of Sir Jon Thompson, is committed to learning lessons of the last few years and controlling costs.”

A DfT spokeswoman said: “We’re focussed on delivering HS2 between London and Birmingham, and are moving forward to build a station at Euston that’s affordable and can open to the public as quickly as possible.”

Mr Harper was asked by the Commons’ Transport Select Committee on Wednesday about allegations that HS2 Ltd previously withheld accurate cost figures from the DfT.

The Cabinet minister said: “There are some allegations that are live, which are being looked at by HS2’s investigative function.

“Obviously because there’s a live investigation, it wouldn’t be right for me to comment on those specifically, except to say if it is found that things have gone on that require a response from the Government, then there will absolutely be one and we will take whatever steps that we need to.”