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Government ‘underestimated’ HS2 risks as £106bn line on the brink

Tom Belger
·Finance and policy reporter
Workers walk past a sign outide a construction site for a section of Britain's HS2 high-speed two railway project, at London Euston train station in London on January 20, 2020. - Britain's government on Monday said it would shortly decide on whether to proceed with its HS2 high-speed two railway project, whose cost is reportedly set to soar to more than £100 billion. HS2, which will quicken rail journeys between London in southeast England and cities to the north of the capital, has been dogged by controversy owing to projected spiralling costs and damage to wildlife. (Photo by Tolga AKMEN / AFP) (Photo by TOLGA AKMEN/AFP via Getty Images)
Workers walk past a sign outside a construction site for a section of Britain's HS2 project. Photo by TOLGA AKMEN/AFP via Getty Images

The UK government underestimated the complexity of Britain’s planned high-speed rail line, according to a highly critical watchdog report.

The government’s handling of the troubled infrastructure project, which is running late and over budget, comes under fire in a new report by the National Audit Office (NAO).

The NAO said it was not even possible to say with certainty how much the final cost of HS2 could be. The department for transport estimates it could cost up to £88bn, but a government-commissioned review leaked to the Financial Times recently said it could spiral to £106bn.

The future of the controversial line is hanging in the balance, with prime minister Boris Johnson currently weighing up whether to abandon the project. A decision could be made within weeks.

READ MORE: War of words as expert claims costs ‘out of control’

The north-south line is the government’s biggest infrastructure project, aimed at connecting London, Leeds and Manchester via the West Midlands. Backers say it will improve journey times and frequency to London and free up capacity on commuter routes in the Midlands and the north.

The first phase of the route was initially due to open in 2026, but services from Euston are now only expected from 2031 and the full line may only be running from 2040.

The NAO said the department for transport based timescales on other infrastructure projects, but “did not take into account” sufficiently how much larger and more complex HS2 was.

Officials also failed to put aside high enough contingency budgets in a bid to keep costs down, according to the NA. This left inadequate spare cash and pushed up costs when the design became more detailed and issues like poor ground conditions later emerged.

READ MORE: Crossrail delayed again as costs soar on new London line

Many workers involved in construction are not employees of government-owned HS2 Ltd, but its staff numbers alone have also more than doubled from initial estimates.

It had around 1,250 staff last year, with numbers rising because of the programme’s “scale and complexity.” Construction delays have also pushed up staff costs as they need to stay in post longer.

The report notes staff are feeling the strain as officials rush to get elements of the project back on track. The NAO were told “the significant, unanticipated, volume of work required in a compressed amount of time has stretched HS2 Ltd’s capacity and put staff under considerable pressure.”

The NAO report said the government will have to buy 70sq km of land along the route, including up to 50,000 compulsory purchases, with as many 10,000 people potentially in line for compensation.

It also spelled out how much work had already been done on the project, raising the stakes if the government decides to abandon it. Two-thirds of the land needed for the first phase has been purchased already, and preparatory work such as demolitions and moving pipes has begun at more than 250 locations.

Prime Minister Boris Johnson leaves 10 Downing Street, London, for the House of Commons for Prime Minister's Questions.
Prime minister Boris Johnson has a choice to make on HS2. Photo: PA

A total of £7.4bn had been spent already by last March, according to the NAO.

A department for transport spokesperson said the government supported the NAO review and was already acting on many of its recommendations.

She said it had worked closely with the NAO and recognised significant cost under-estimates, leading to its decision to commission the Oakervee review into the project.

An HS2 Ltd spokesperson said: “After being appointed HS2 Ltd CEO in 2017, Mark Thurston identified the serious challenges of complexity and risk in the project, and he made several significant changes and improvements to the organisation, its governance and processes.

“As the NAO recognises, this work – along with a greater understanding of the ground conditions and build requirements – means ministers have robust cost estimates for phase one of the HS2 project.”