HS2 – stuck in the sidings and the signals aren’t good

A scan of the newspapers over the bank holiday weekend provided a pretty damning assessment of HS2’s future – most of the national press seems to have it in for the £56bn scheme, slamming it for spiralling costs and congratulating prime minister Johnson for his “fresh thinking” in launching his “go or no-go” review.

And for those who support what would be largest infrastructure scheme in Europe, the bad news stories just keep coming. The Daily Mail revealed that it understands investigators are looking into allegations of corruption in the way some contracts may have been awarded to suppliers, while the Telegraph reported electricity bills may rise to pay for works on the UK’s energy network for HS2. And then the BBC shared leaked documents proving the government knew the budget was unrealistic three years ago, before MPs signed off the first phase of the project connecting London to Birmingham.

The latter story would probably not surprise many in the construction industry – there is a long-held suspicion that ministers don’t really want to know the true costs of infrastructure schemes, or at least they don’t want voters to know until they’ve got their pet project over the line and then they can conveniently blame spiralling costs on delivery teams grappling with the complexities they were happy to gloss over.

• Read: George Osborne think tank launches pro-HS2 ‘review’
• Read: Which construction firms have won HS2 contracts so far?

Flashback to February this year when Building ran a piece assessing the high speed railway’s chances of survival. We pointed out all the challenges that had failed to bring it down so far: the rounds of spending cuts under austerity, the years of protest campaigns, the court cases. But just as construction seemed within touching distance in 2018, a leaked report inflicted a big blow: it turned out the projected budget estimates had jumped by a staggering £30bn.

Cost has been a nagging issue for some time. In 2012 the government budgeted £32.7bn; by 2013 this was revised up to £42.6bn. But revising up the 2015 estimate of £55.7bn to north of £80bn played into the hands of hardened opponents and undermined cross-party support.

Still, just six months ago there was optimism that the revised business case being considered by ministers would go through and finally construction would be triggered by the government’s notice to proceed.  After all it had the backing of then prime minister Theresa May who said in its defence: “It will bring tens of billions of pounds’ worth of benefits to passengers, suppliers and to local communities up and down the route.”

HS2 has no such champion at the top now, quite the opposite.

Boris Johnson has made no secret of his dislike for HS2 and in the leadership race promised to review it. Sure enough, Doug Oakervee is now tasked with a full assessment due towards the end of the year.

Of course, many believe Oakervee, as a former HS2 chair, will be sympathetic to industry pleas to consider the benefits of a once in a generation scheme. But they have reason to worry about his deputy on the review panel, Lord Berkeley, an arch enemy of the scheme who told the Telegraph the review will “examine all possibilities” and “the outcome might be to cancel, truncate or reduce the specification of HS2”.

So is there anyone standing up for HS2? Well, George Osborne’s think tank the Northern Powerhouse Partnership this week launched a parallel review of the project offering “a northern perspective” and making “bold and realistic proposals”. Fundamentally, it believes that both HS2 and a new east-to-west high-speed rail line are needed to boost the North’s economy. Manchester mayor Andy Burnham is of a similar view warning that if HS2 is scrapped as a result of the review, “the government had better get ready for an almighty fight with the big cities of the North.”

All this political chopping and changing is far from ideal – and the £7bn already spent seems a hell of a waste – but it may not be all doom and gloom for the construction industry at least. Yes, it will be a real shocker for the big names that thought they had bagged big number contracts – the likes of Costain, Skanska, Morgan Sindall, Bam Nuttall, Laing O’Rourke, Kier and Balfour Beatty are already in deep. But if HS2 is curtailed or even scrapped completely, it’s extremely likely Johnson will have to conjure up another big spending plan to boost the economy post 31 October. There is always the temptation to divert capital spending to revenue spending on key services such as the NHS and schools, especially if you are contemplating an election. But Johnson has already signalled his intention to invest in the Housing Infrastructure Fund, a £600m fund announced by the chancellor Sajid Javid last week to support the building of 50,000 homes in the south of the country. This has fuelled rumours that the government is planning a big public spending spree.

What is clear is that the HS2 review means that construction jobs we all thought were more likely to go ahead than not are now on the line. If the worst happens and the railway is scrapped, the industry will want to know pretty damn quickly how the money that would have been spent will be diverted, and you can bet that contractors, as well as political leaders in the north of the country, will be lobbying extremely hard for much needed investment in transport and infrastructure above all else.

Chloë McCulloch, editor, Building