As the UK’s flagship HS2 rail project faces a two year delay, we examine some of the industry reaction and highlight the need for politicians to hold their nerve in the face of inflationary pressures.
The UK construction industry has reacted with dismay to the news that the flagship HS2 rail mega-project will be delayed by a further two years as a result of rapidly rising costs.
Rising inflation is clearly having an effect on all aspects of business and the global economy. Major infrastructure projects are particularly susceptible to the increases in project and supply chain costs that have been driven up by inflationary pressures but these should be factored in and taken into account by governments who know that large-scale mega projects that take many years to build rarely come in at their original projected cost. And, costs also need to be set against the benefit that these projects will bring to society when they are completed.
As the CEO of the UK Association for Consultancy and Engineering (ACE) Stephen Marcos Jones rightly said: “I think every sensible person knows that global events have driven inflationary pressures to record highs, but we have already spent significant sums on the design and delivery of this transformational major project . . . and the delays announced by the government are, quite simply, an absolutely false economy.”
Delays won’t save money
Jones is spot on. Delays to any major project will almost certainly lead to increased costs in the long run. With HS2, there is also the knock-on effect on business and industry confidence to consider and the effects of the announcement on the wider UK economy. It is also worth considering how the delay will affect the UK ‘s reputation internationally for delivering major infrastructure projects. Frankly, delaying HS2 is not a good look on any level and it certainly won’t save money.
As Transport for the North chair Lord McLoughlin said: “The government needs to avoid being penny wise and pound foolish, as delays don’t necessarily lead to savings, and in fact can drive costs upwards.” An opinion which was backed up further by the UK High Speed Rail Group, which said: “Every cost element that makes up HS2 rise each time the project is delayed. Constant uncertainty in government breeds uncertainty in industry which does nothing to ensure efficient delivery.
“Investment to upgrade our national infrastructure is imperative to achieve the economic growth needed for prosperity and opportunity. HS2 is the single largest infrastructure project in Europe and will bring the UK’s cities and regions closer together. Delays and cuts cost the people of Manchester, the people of Liverpool and the people of Glasgow at a time where what Britain needs most of all, is economic growth. If you cut investment, you cut growth and that is what are seeing here.”
Quite so. So why is the UK government delaying the project at this time? It seems that it is prioritising short-termism and political expediency over a structured, long-term strategy for what is, lest we forget, Europe’s biggest infrastructure project. A stop-start approach to a major project like this will almost inevitably lead to increased costs, which is the very opposite of what the UK government is trying to achieve.
Wider issues to consider around major infrastructure projects
There are wider issues too around how governments and the public view major infrastructure projects. By their very nature, these are massive undertakings which can take many years to be delivered. They are, therefore, subject to the vagaries of market forces, rising inflation and – as we have seen more recently – unexpected geopolitical events that can also drive up costs.
There probably also needs to be a rethink on how major infrastructure projects are scoped, planned and delivered, with much more of a shared understanding and agreement amongst all politicians that these are projects for the long term which will bring significant social and economic benefits. To that end, they need to be planned and funded adequately and politicians need to hold their nerve when the going gets tough.
Balancing the effects of rising inflation – and the resultant increasing project costs – against the benefits that major projects like HS2 will bring to society, is vital in explaining to the public why such projects are necessary and that investment in them will pay off handsomely in the long run. At the end of the day, the cheapest way to deliver HS2 and projects like it is to deliver them quickly.
Of course, mega-projects also need to be part of a longer-term national transport strategy, with clearly mapped out investment plans, to ensure that countries are able to deliver the effective, efficient and green transport infrastructure they need. Thereby providing more reliable methods and modes of travel in a way that is better for society and the planet.