A question mark over the government’s commitment to HS2 doesn’t just damage confidence among contractors and their supply chains, but potential investors too. The uncertainties raise a further question, is the UK a reliable place to do business? Tim Clark reports
As a double act, Laurel and Hardy’s form of slapstick humour was regularly accompanied with the phrase “and another fine mess you’ve gotten me into…”
When it comes to government policy over High Speed Two (HS2), the construction industry can be forgiven for thinking it has taken the role of Olive Hardy himself; the victim of foolish political mishaps, and liable to clean up the mess that the current government incumbent makes of its infrastructure policies.
The latest speculative furore revolves around an image, snapped by a press photographer, which revealed part of a cost estimate table for HS2’s Phase 2a, Phase 2b and HS2 East.
The figures show a scorecard (in cash terms) and a range of projects in terms of costs. It showed that in total, up to £34bn could be saved if Phase 2a, 2b and HS2 East were potentially shelved.
For their eyes only
Although not intended for public consumption, and only a partial glance at what the prime minister and chancellor were being briefed on, the image led to speculation that the government could cancel the entire project north of Birmingham – as well as the Euston terminus – entirely.
Speaking to Build In Digital, Alasdair Reisner, chief executive of the Civil Engineers Contracting Association (CECA), points out that the government hasn’t done much to dismiss the rumours over HS2’s future following the leaked figures.
“It is just speculation based on a document held by a civil servant entering Number 10,” he says. “But I think what is worrying is that the government hasn’t taken the opportunity that has been presented to it to put out a statement of support for HS2.”
In a post shared via LinkedIn, CECA stated that any cancellation of HS2 to the North would make Britain a “laughing stock” that would undermine the UK for the next generation, adding that no British government has made such a short-sighted and self-harming decision “since Harold Wilson’s administration stopped work on the Channel Tunnel in the mid-1970s”.
“These decisions [to scrap parts of HS2] are not without consequence,” Reisner adds. “The project was adding hundreds of billions of economic activity and construction firms have invested on the basis that it would be happening.
“People would look at HS2, and say leave school and train up as a civil engineer, as there was a project to work on for 10 years, so uncertainty on the project is unhelpful in that respect. But also this has ramifications for the wider UK construction industry.
“That is because it sends a message that industry can’t bank on statements made by this government, because it may just change its mind and go in a different direction. That can be problematic for confidence in future investment pipelines.”
The North remembers
“[I]t sends a message that industry can’t bank on statements made by this government, because it may just change its mind and go in a different direction.”Alasdair Reisner
Reacting to the speculation the High Speed Rail Group said that the cancellation would be a “disaster for the North and the Midlands”.
A group spokesperson said: “Once again the 30,000 men and women who are working every day to deliver HS2 will return home to find further speculation about whether they will be allowed to complete the job they have started.
“Were phase 2 to be cancelled it would be a disaster for the North and the Midlands. After 13 years during which the government has promoted the project, it would also be the ultimate U-turn.
“The government needs to kill the speculation and make its intentions clear, and it ought to commit clearly and unambiguously to delivering the project as planned. The 30,000 people delivering HS2 deserve this. Our future generations deserve this. The North and Midlands deserve this.”
In terms of project scope, HS2 seems to be fated to suffer death from a thousand cuts.
When initially dreamed up under the Labour Party in 2008 the project had a spur to Heathrow as part of Phase 1, a link to the existing High Speed 1 at St Pancras, as well as a full Y-shaped route which would link Birmingham, Manchester, Leeds, Sheffield and other cities directly with London.
Cost overruns have eaten into the original ambitions for the project, and Heathrow and the HS1 link were cut early on, the eastern leg was shelved in November 2021 and the latest news that the route north of Birmingham to Crewe makes for a daunting prospect.
In march this year, the National Audit Office (NAO) called for a reset at one of HS2’s most expensive components: the Euston terminus in London. The NAO said that the terminus was £2.2bn over budget – at 2019 prices – and that the costs issues could worsen due to a pause in construction.
The NAO report was followed on by another scathing publication in July by the Infrastructure Projects Authority (IPA), which branded the scheme “unachievable” as it was not able to be delivered in the current format.
To a certain extent HS2 could be considered its own worst enemy.
As the budget has grown it has taken up funding that was initially earmarked for other major rail projects. Of the £96bn allocated for the Integrated Rail Plan, HS2 was given £60bn for Phase One and Phase 2b, with the cost for any eastern leg on top, any further budget pressure has the potential to eat into other rail projects.
One rail expert commented to Build In Digital: “Once the cost of the full scheme is taken into account there will be nothing left for anything else, at least if they produce some realistic costing. It leaves the Integrated Rail Plan in tatters.”
Disregarding the argument over whether HS2 is value for money, or worth building for a moment, the construction industry has grown weary of a government that seems unable to commit to a project without constantly changing its mind.
Terminus or terminal?
In July, the chief executive of Tier One contractor Mace, Mark Reynolds, criticised the government after the decision to mothball work on the £3bn Euston terminus.
He accused the government of “sneakily” releasing news of the hiatus in work only weeks after reassuring contractors on the scheme that work was still pressing ahead.
The contractor, which is in a joint venture with Spanish firm Dragados, had around 350 staff working on the Euston project at the time it was paused.
Speaking to trade publication Building magazine, Reynold’s said: “Everyone has done all this work, the prime minister and chancellor got door stepped earlier this year and they stood there, bold as brass to say ‘yes, it’s going to Euston’ and a few weeks later they sneakily put out a statement, that was read out in Parliament, to say it’s been suspended for two years. It’s absolutely shameful.”
Following the latest speculation, one official at a senior UK contractor told Build In Digital: “There is a reason the UK is the most expensive place in the developed world to build infrastructure, and why the construction industry has such crap productivity improvement figures.
“How can anyone invest effectively when the government and opposition casually just take tens of billions out of the infrastructure pipeline with a moment’s notice?”
The flip-flopping is indicative of a wider problem in government. This week, at the time of writing, it was leaked that the prime minister is planning on pushing back the timetable for the phasing out of petrol and diesel cars from 2030 to 2035 as well as a number of other net zero targets. [Subsequently confirmed by Rishi Sunak in an announcement on Wednesday].
The decision prompted a fierce reaction from car manufacturers, which base their investment decisions on the certainty of long-term government policy.
In a post on Wednesday, global carmaker Ford said: “Our business needs three things from the UK government: Ambition, commitment and consistency. A relaxation of the UK 2030 target would undermine all three.”
Wither on the line
Business reaction to the HS2 speculation has been equally scathing of the government’s HS2 policy.
Alex Veitch, director of policy and insights at the British Chamber of Commerce, said: “If the government further reneges on its plans for HS2, then it will shatter business confidence, both in the UK and among overseas investors, in its ability to see large scale construction infrastructure projects through.
“Public investment in HS2 must be properly managed, but it should be remembered that it not only promotes long-term growth in the UK economy, it also injects much-needed wealth into local areas and create jobs.
“This feeds revenue back into the Treasury coffers, generating a return on investment for the Government … If speculation is allowed to grow unchecked, and the project is further delayed or cut back, then there is a real danger that this growth will wither on the vine.”
The dilemma for the government is a tricky balancing act between two options: Be damned for investing in a seemingly bottomless pit of funding for HS2, whose costs continue to rise, or strip back a scheme, stem its losses but damage confidence in itself whenever it comes back with a future HS2 it wants both the industry and the public to invest in.
“This is not a free lunch,” Reisner adds. “You don’t get to make these decisions without stark implications for all parties.”
Image credit: HS2
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