HS2 ‘overestimated cost of Birmingham leg’

HS2 has been accused of overestimating the cost of its Birmingham leg by the Government.

Huw Merriman, the rail minister, claimed estimates that showed the line between London and Birmingham would blow its budget by £8 billion were wrong, and called for an urgent review.

The comments came in the Government’s latest six-month update to Parliament on the progress of HS2, the first since the Government scrapped the northern leg of the line.

HS2 Ltd believes phase one is now expected to cost between £49bn and £57bn, well above the £45bn previously budgeted”.

In response, the Government said it disagreed with HS2’s assessment. Its own estimates indicate that the final costs could be as low as £45 billion.

It said: “Department of Transport officials have, therefore, estimated a provisional range of £45 billion to £54 billion on the basis of the same data used by HS2 Ltd, but using different assumptions on how much remaining cost risk remains addressable.”

The update pointed out that the estimate had been put together by HS2 in September, before Rishi Sunak, the Prime Minister, announced that the northern part of the line to Manchester would be cancelled.

It said: “The scope and costs of phase one will now be reassessed following the decision not to proceed beyond the Midlands, including the decision to adopt a development-led approach to Euston.”

HS2 confirmed its initial estimate included the cost of the Euston Station, which the Government now hopes to fund through private funding, as well as the tunnel approaches to the station.

The confirmation of the £8 billion over-run is the latest example of costs running out of control on the HS2 line.

Estimates in 2015 put the cost of delivering the whole line to Manchester at £56 billion, but this ballooned to more than £107 billion before the axe fell on the northern part of the scheme.

The current estimates are also only in 2019 prices, meaning they are likely to be far higher when HS2 is forced to publish in today’s values and inflation is accounted for.

HS2 blamed delays in planning and environmental consents, programme scope changes, and supply chain pressures linked to the pandemic and Ukraine war for the new costs.

A spokesman said: “This is a project of unprecedented scale and complexity.

“With hindsight, estimations made prior to full construction by the Government and HS2 Ltd were overly optimistic and delivery performance did not fully match expectations.

“HS2 Ltd, under the new leadership of Sir Jon Thompson, is committed to learning lessons of the last few years and controlling costs.”

Mr Merriman has now asked Sir Jon, the executive chairman of HS2, to look again at phase one costs following the scrapping of the northern leg and come up with a revised scope for the scheme which will achieve the “lowest reasonable cost”.

The Telegraph understands Sir Jon is leading work to update the estimate and reduce costs, which will include cutting day-to-day spending. That could include job cuts.

He will also look to finish design and construction work on phase two as soon as possible, as well as reassess some of the scope of the line to Birmingham.