HS2 delay will increase costs, warns spending watchdog

The decision to delay the UK’s High Speed 2 rail line will pile new costs on to the beleaguered project, according to a report from the public spending watchdog, which also calls for plans concerning London Euston station to be reassessed.

The National Audit Office’s report, released on Monday, illustrates the scale of the challenge facing the rail line linking London to Birmingham and Manchester, following years of delays and cost overruns.

Earlier this month ministers announced plans to delay building the Birmingham to Crewe leg of the line, as well as the final stretch into Euston in central London, to try to control costs amid spiralling inflation.

In commentary alongside the report, the auditors said this delay would see spending “deferred in the short term” and allow the station at Euston to be put on “a more realistic and stable footing”.

But it added the decision would ultimately “lead to additional costs” and “potentially” a more expensive project overall.

Costs associated with the delay will include supply chains stopping and restarting, contractual changes and managing sites for longer, the NAO said.

The price tag of HS2 has soared from £33bn a decade ago to as much as £100bn, and the line has suffered reductions to its scope as ministers have tried to get a handle on its budget.

The assessment of the costs arising from the delay came alongside a damning report into the rebuilding of Euston station in central London to serve as HS2’s final stop in the capital.

Ministers paired down plans for Euston in 2020, including a simpler design and reducing the number of platforms from 11 to 10. But the report found the new plan was now £400mn more expensive than the original.

The NAO said the Department for Transport and HS2 should use the two-year delay to parts of the project to “reassess” plans for the station yet again, given work at Euston was now £2.2bn over budget with an expected cost of £4.8bn.

“Clearly the 2020 reset of the station design has not succeeded,” said Gareth Davies, comptroller and auditor general at the NAO.

“DfT and HS2 Ltd have not been able to develop an affordable scope that is integrated with other activity at Euston, despite their focus on costs and governance since 2020. Recent high inflation has added to the challenge,” he said.

The report, which took evidence before the decision to delay the project, added that the government should consider resetting HS2’s costs and budget into 2023 prices, and look at whether the Treasury, rather than the DfT, should absorb the costs of rising inflation.

In response to the report, the DfT said it remained committed to HS2 “in a way that delivers the best value for money to the taxpayer”.

“That’s why we recently announced we will rephase the Euston section of the project to manage inflationary pressures and work on an affordable design for the station,” it added.

HS2 said Euston was “one of the most complex parts of the . . . route to build”.

“We are committed to working with DfT and partners to consider the recommendations of the NAO report, and to ensure we get an affordable station that is right for the local community and passengers,” it said.