HS2 to be delayed by two years due to increasing costs

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Parts of the UK’s HS2 mega-project are to be “rephased” by two years and a number of major road schemes mothballed as government ministers look to tackle rising costs and inflation.

UK government ministers have announced a two-year delay delay to the construction of key sections of the HS2 rail line in order to try and address budget overruns amid soaring inflation.

Along with a further two-year delay to the project, a number of major road schemes are to be paused, UK ministers have confirmed, after rapidly increasing inflation added billions of pounds to the cost of transport infrastructure projects.

Parts of the proposed HS2 line between Birmingham, Crewe and Manchester will be “rephased” by two years and there is a possibility that trains might not run all the way into central London until years later than planned as the UK government says it needs to “take time to ensure we have an affordable and deliverable station design” at Euston.

Key UK road projects are also to be delayed as transport budgets face big cuts from 2025. The Lower Thames Crossing, a £7bn tunnel and road scheme linking the counties of Essex and Kent, will be deferred for at least two years as the government looks to recalibrate its transport spend.

Speaking about HS2 today, UK transport secretary Mark Harper said: “We have seen significant inflationary pressure and increased project costs, and so we will rephase construction by two years, with an aim to deliver high-speed services to Crewe and the north west as soon as possible after accounting for the delay in construction.”

It has emerged that a further £2bn will be needed for the first London-Birmingham stretch since the last HS2 official update in October. This figure is significantly above the contingency sums allocated in the project’s initial £44.6bn funding and will inevitably cast doubts over the project’s full delivery.

Back in January this year, the UK chancellor and prime minister said that the government still planned to build the full line from London to Manchester even though the Department for Transport has faced increasing pressure to cut the project’s cots amidst the rising cost of materials due to the high rate of inflation.

Mark Thurston, chief executive of HS2 Ltd, recently told the BBC that he and the government were examining the phasing of the build and the timing, admitting that the impact of inflation had been “significant” in the past year, “whether that’s in timber, steel, aggregates for all the concrete we need to use to build the job, labour, all our energy costs, fuel”.

Thurston said that HS2 was working with suppliers and the government to find ways of mitigating rising costs. “We’re looking at the timing of the project, the phasing of the project, we’re looking at where we can use our supply chain to secure a lot of those things that are costing us more through inflation,” he said.

Commenting on the government’s announcement, Stephen Marcos Jones, CEO of the UK Association for Consultancy and Engineering, said: “Today’s news on HS2 is potentially a real body blow for the UK’s economic recovery. 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.

“Scaling back ambitions at this stage will mean the economic and social benefits of HS2 for communities across the UK is further watered down – and major delays like this are actually going to cost more in the longer term. In a nutshell, the delays announced today are, quite simply, an absolutely false economy.”

John Foster, director of the policy unit at the UK business group CBI, said that the delay to HS2 will reduce investor confidence in the rail sector. “Delays to projects may create short-term savings, but they can ultimately lead to higher overall costs and slow down the UK’s transition to a better, faster and greener transport network,”  he said. “To mitigate further loss of confidence, it is critical that government tackles the inflationary pressures which are biting hard across the infrastructure sector,” said Foster.

The UK government’s announcement of a delay to its flagship transport project, as well as the stalling of major road schemes, is likely to dismay many in the construction sector, both in the UK and globally. It also highlights growing concerns across the industry over whether increasing inflation and the knock-on effect on project and supply chain costs will have a more widespread impact on other large-scale projects in the UK and internationally.