HS2 delays will ‘reduce contractor confidence’

The government’s decision to delay the construction of parts of HS2 will “reduce investor and contractor confidence in the rail sector”, according to the Confederation of British Industry

On Thursday, transport secretary Mark Harper announced that construction work on HS2 phase 2a would be delayed by two years, while work on HS2’s Euston station was also being pushed back so that it could be delivered alongside phase 2b of the project.

Harper said the decision was due to “significant inflationary pressure and increased project costs” on the megaproject, which was originally priced at £30bn but is now expected to cost up to £100m. However, industry voices said the delays would hurt construction businesses – and fail to save the government money.

John Foster, programme director at CBI’s policy unit, said: “Having been subject to significant revisions and years of uncertainty, business[es] will at least have the clarity needed to enable them to plan effectively.

“But this news will ultimately reduce investor and contractor confidence in the rail sector. To mitigate further loss of confidence, it is critical that [the] government tackles the inflationary pressures which are biting hard across the infrastructure sector.”

The sentiment was echoed by the Construction Plant-hire Association, with the trade body’s policy manager, Chris Cassley, describing the announcement of delays – weeks after chancellor Jeremy Hunt denied there would be any – as “disappointing and frustrating”.

“This undermines confidence in the wider project itself, and at a time when we need construction as a long-term driver of sustainable growth, raises questions towards the government’s commitment to future infrastructure projects,” he said.

John Armitt, chair of the National Infrastructure Committee, which provides advice to government on big infrastructure projects, also opposed the delays and said they would affect market confidence in the scheme.

“Every time you delay a construction project you inevitably increase its cost because some of the costs do not get defrayed, they do not get stopped, you just simply run them out for a longer period of time,” he said on BBC Radio 4’s Today programme.

“By putting in this delay, you simply put doubt in people’s mind[s]. The best thing you can say is not ‘let’s cancel it’. The best thing we can do is be absolutely certain that we will build it and that we will build it as soon as possible.”

“[The delays are] clearly a cashflow issue: the government is trying to slow down its cashflow. It may slow down its cashflow a little bit, but it will increase its end cost. And it will impact the confidence and certainty people will have about investing in this country.”

Responding to the government’s decision to delay parts of the project, a spokesperson for HS2 said: “We welcome the government’s commitment to delivering HS2 from Euston to Manchester.

“We have been transparent about our cost challenges and have worked closely with the government to reach a solution which ensures we continue to boost regional economies, support the drive to net zero, and better connect our towns and cities.

“Our priority is to maintain the fantastic momentum underway to ensure the initial high-speed services connecting Old Oak Common and Birmingham Curzon Street are operational by the early 2030s.

“HS2’s construction will continue to support thousands of jobs, benefit UK businesses of all sizes, and lay the foundations for the arrival of more new rail services into the next decade and beyond.”