UK HS2: northern exposure should not give Sunak cold feet

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There is an air of melancholic inevitability about infrastructure projects that cost double their original budget. The £12bn Channel Tunnel was just one example. Yet the size of the cost overrun of the UK’s HS2 rail project is truly something special. The anticipated £91bn price tag is more than twice the 2010 estimate for a more ambitious scheme.

No wonder Rishi Sunak wants to scale back the north-south high-speed rail project. The prime minister is reportedly planning to axe a spur to Manchester. The estimated savings of almost £30bn appeal to a cash-strapped government.

Yet such a move would also reduce the capacity and connectivity gains needed to have any chance of justifying the project. Capitalised costs were always at least twice as high as the capitalised value of passenger revenues once in operation, according to Imperial College professor Stephen Glaister. 

The capacity constraints on north-south rail links — usually cited as HS2’s main justification — have been eased by post-pandemic changes in working practices. Passenger numbers are about 20 per cent lower than pre-Covid levels, adjusted for the advent of London’s new Elizabeth line.

Reduced commuter times and widening labour catchment areas can increase agglomeration benefits. But the extent of these gains can be exaggerated. Door-to-door travel times probably need to be less than an hour to count. Better regional transport links are likely to offer greater productivity benefits than long-distance links. 

The impact on the construction industry is another factor, though no contracts have been awarded for the northern leg yet. Costain and Kier are most exposed to HS2. But cancelling the second phase is unlikely to have a near-term impact, according to Liberum’s Joe Brent.

Yet there is an understandable desire to get something of value to show for the huge sums already expended on the project. In 2021, the Treasury assessed the longer HS2 route as offering “low-to-medium” value for money. That is hardly a ringing endorsement. But it is better than a cut-down London-Birmingham line, which was rated “low value for money”.

Cancelling the Manchester leg would leave HS2 as little more than a shuttle between a west London suburb and Birmingham. That would be a parody of its original purpose. It would put HS2 on track to rival Concorde as the epitome of government folly.