Latest delays to HS2 forecast to add £366mn to soaring final bill

The decision by ministers earlier this year to delay the construction of part of the High Speed 2 rail line from London to northern England will add £366mn to the scheme’s soaring final bill, according to internal government estimates.

The controversial project, which was originally envisaged as a new high-speed line linking London to Manchester and Leeds via Birmingham, has suffered successive delays, cost overruns and reductions to its scope. Its price tag has more than doubled from the original budget of £33bn a decade ago.

In March, the government said it would delay by two years the construction of the Birmingham to Crewe section, known as phase 2a, in an effort to find short-term savings as part of a wider cost-cutting drive to tackle the “headwinds of inflation”.

The opening of the first phase from London to Birmingham, which is already under construction, has already been pushed back from 2026 to between 2029 and 2033, while much of the line to Leeds has been axed.

The section to Crewe is part of the second phase of the project linking Birmingham to Manchester, whose completion has already been pushed back from 2033 to between 2035 and 2041.

Officials close to HS2 said the delay to phase 2a would add an extra £366mn to the final bill. In March, a leaked paper drawn up by HS2 director-general Alan Over warned that pushing back the Crewe section could lead to job losses and drive up overall costs. “Additional costs will be created by deferring expenditure on the programme,” he wrote.

The National Audit Office, the public spending watchdog, also warned after the announcement that the extra delay would ultimately “lead to additional costs”, citing issues such as contractual changes, the need to manage sites for longer and the impact of supply chains being stopped and restarted.

Noble Francis, economics director at the Construction Products Association, said that any delays to construction work would “inevitably raise costs significantly as labour will have to be stood down and rehired while ground conditions may deteriorate”.

In addition, soaring inflation meant prices for materials were already 43.1 per cent higher than they were in 2020 and would only rise further over the next few years, he said.

At the time of announcing the delay to the Crewe section in March, the government said it would prioritise HS2 services to Birmingham from a new station of Old Oak Common in west London rather than taking the line into the central terminus at Euston as planned. It insisted at the time that it remained “committed” to eventually taking the line into Euston.

Earlier this week, Huw Merriman, rail minister, said in a written statement that the cost of rebuilding Euston had risen by £2.2bn to £4.8bn and said it was “not affordable” at that price. Instead, he said, the government would use the next two years “to develop a more affordable scheme design that delivers for passengers, the local community and taxpayers”.

The minister added that the estimated surge in Euston’s price estimate was based on 2019 figures and did not even take into account the “significant inflation” of the past four years.

The government has not produced a revised estimate for the overall cost of HS2 since it pushed back the opening of both main phases of the line and axed the route to Leeds.

Its most recent estimate is £53bn to £71bn in 2019 prices for the western leg of the line from London to Manchester. The section that remains of the original eastern leg from Birmingham to Leeds is still uncosted.

As a result, some industry experts believe the overall price tag could end up closer to £100bn in today’s prices.

A spokesperson for the High Speed Rail Group, the body of businesses which work on high-speed rail, said: “As we said when the two-year delay was announced in March this year, the cheapest way to deliver HS2 is quickly. We need ministers to urgently agree a long-term plan to deliver this vital piece of infrastructure.”

The Department for Transport said: “Large infrastructure projects have to be funded sustainably. Over the next two years, spending will remain within the annual budgets and some stages of the project will be rephased to ensure they are delivered in the most cost-effective way for taxpayers.”

HS2, the public body delivering the project, declined to comment.