In a statement to Parliament on 18 June, Transport Minister Heidi Alexander’s statement drew a line in the sand in respect of HS2. She emphasised that its problems of “budgets calculated then blown, promises made then broken” were now in the past. She explained how the project was being reset by its CEO Mark Wild to bring costs under control and provide a realistic estimated final cost and opening date.
She referred to former Prime Minister Gordon Brown’s vision of great cities in the Midlands and the North, which had been untapped at best and ignored at worst, becoming places of opportunity again as the high-speed rail revolution linked them to address their future capacity needs.
Her statement referred to the letter from Mark Wild in March with his initial assessment of the project and the Stewart Review, which was published on the same date as her statement, on the governance and assurance of major transport projects that particularly considered HS2.
Wild’s assessment
Although 75% of HS2 work should have been completed according to the current schedule, Wild found that only around a third has been finished. Hence opening the line in 2033 will be challenging. He also considered that the 14 months allocated to test the railway was insufficient as more realistic time would be 36 months.
HS2’s latest cost estimate for Phase 1 is £61.8 billion, excluding Euston. Wild advised that the priority was stabilising the Main Works Civil Contracts (MWCC) which carry most of the financial risk.
One of the main reasons for the project’s cost and delay was that construction commenced too soon without stable and consented designs. Furthermore, cost and schedule estimates were optimistic, and the contracting model did not drive performance. The MWCCs were awarded at a scale never seen before in UK infrastructure and put almost all risk on HS2, effectively turning them into cost-plus contracts.
He found that HS2 is not set up to effectively manage delivery. Although HS2’s local project team structure requires hands-on, commercially astute contract management, its commercial and technical functions are under resourced despite HS2 having a large headcount. Hence, while the corporate centre has grown excessively, delivery teams lack the resources they need.
Based on his experience getting the Elizabeth line opened, Wild advised that he had four priorities:
Simplifying the day one railway to provide a staged approach to reduce risks and improve reliability and cost certainty while reducing the delay to the railway’s opening. This might involve initially operating at a reduced speed without automatic train operation.
Ensure risk is more appropriately shared with the supply chain by renegotiating MWCC contracts which may require Government support.
Implement a new and radically simplified HS2 organisation structure that will address the identified issues of delivery capacity, culture, and capability.
Reset HS2’s relationship with Government to establish alignment and enable successful delivery.
Stewart Review
In September 2024, former Crossrail CEO James Stewart was asked by the Transport Minister to conduct an independent review of how the Department for Transport (DfT) governs and assures the delivery of its major projects with a particular focus on HS2. His 131-page report covers HS2’s governance, assurance, cost, schedule and benefits, capability and culture, MWCCs, and Euston. It also has a section on wider lessons learnt for major projects in transport and other sectors.
The governance and assurance section made various recommendations to ensure that there was greater trust from improved visibility and sharing of the issues. This included the formation of a Ministerial Task Force.
This also highlighted how political decision-making has both accelerated and delayed the schedule. Pressure to maintain momentum forced the schedule ahead of where it wanted to be. Meanwhile, slowness of decisions caused significant delays leading to rising costs. The review recommended that there should be a political buffer of stakeholders prepared to challenge decisions taken by politicians.
The review also noted that the 2013 Hybrid HS2 Bill was launched when the design was only 4% complete. It noted that most experienced major project practitioners consider that taking planning and development decisions off the back of an immature design is a mistake.
It also considers consents. Despite HS2 having Parliamentary powers to construct the line, the Hybrid Bill process required over 8,000 consents to be obtained. While the schedule assumed an approval period of 56 days, in practice consents took far longer and, in some cases, took over a year as the UK planning regime is more burdensome than other countries. This was a major cause of HS2’s increased cost.
The review’s section on cost control showed how costs had been driven up by:
- Lack of a culture to reduce costs.
- No iteration of scope and design to reduce cost.
- Failure of cost control.
- Schedule prioritised over cost.
- Uncertainty and changing scope requirements.
- Environmental decisions.
- Cost estimate optimism.
- Reliance on point estimates rather than ranges.
Various commentators consider the Stewart Review to be a credible report. Indeed, in her statement, Alexander advised that all the recommendations of the Stewart Review had been accepted. Yet Stewart’s view that the line’s design speed caused high-cost increases is not that of the person responsible for HS2’s specification.
His review states: “A railway that was originally intended to increase capacity became a vision to build the best and fastest high-speed railway in the world. This effectively ruled out the cost savings expected from utilising HS1 design.”
In contrast, in 2023, former HS2 technical director, Andrew MacNaughton advised the Transport Select Committee (TSC) that: “Every part of the scheme was designed, in reality, by the people who had designed HS1. That was a scheme of similar complexity, through a densely populated area, with long tunnels into London. The incremental cost of new capacity at high speed is marginal over the cost of new capacity at lower speed. Speed is really not an issue.”
As shown below, the recent TSC also considered this issue but was unaware of the rationale for HS2’s maximum design speed despite having questioned MacNaughton less than two years previously.
Transport Select Committee
On 9 July, Mark Wild, Rail Minister Lord Peter Hendy, and the DfT’s Director General, Major Rail Projects Group, Allan Over appeared before the TSC. Wild stated that he appreciated the time and space he had been given for his reset which will be complete by early next year. This will create a reliable cost and time range that will be progressively narrowed up to the end of the project.
He emphasised the need to renegotiate the MWCCs. At notice to proceed, contactors could not price for risk and so made many contract exclusions which were transparent in these completely normal, well-constructed legal contracts. Yet there was no incentive to maximise productivity.
Notwithstanding the cost overruns, Lord Hendy noted that there was a forest of cranes in Birmingham constructing buildings in anticipation of HS2 which has been estimated to be worth £10 billion to the local economy. He is sure HS2 will be successful and noted that the Jubilee line originally had a poor business case, yet it supported an astounding increase in economic activity in East London.
Mark Wild noted that the Stewart Review also considered that the benefits of HS2 were underestimated as it will join the Birmingham and London conurbations together in an economic union. Alan Over advised that the direct transport-related benefits of the Elizabeth line are exceeding expectations.
The need for speed
HS2’s gold plating was frequently mentioned and, in particular, HS2’s maximum design speed of 400km/h on which trains capable of 360km/hr will normally run at 330km/hr.
Hendy found it “hard to understand why there was such zealotry about the highest speed high speed railway in a relatively small country”. Alan Over could not explain why HS2 was designed for such high speeds as this decision predated his appointment. TSC chair Ruth Cadbury voiced her astonishment that it was not clear why this decision was taken.
Yet in 2012, the DfT published a review of HS2’s technical specification which explains why 360km/hr trains were chosen. Furthermore, in November 2023, a TSC hearing, with a different chair and membership, questioned former HS2 Technical Director Andrew MacNaughton.
MacNaughton advised that expert engineering advice had shown it “…is simply not the case that speed impacts the alignment if you are going to build a new railway. It would be pretty much the same railway whatever speed you ran it at,” and the incremental cost of HS2’s high speed is marginal.
He emphasised that 360km/h high speed trains are now not exceptional and are proven technology. Furthermore, the business case for HS2 Phase 1 published in 2020 considers that running at lower speeds would only reduce costs by 10% while reducing benefits by 33%. One benefit is that running the trains at higher speed reduces the number of trains required.
The view of the panel at the recent TSC was that designing HS2 as a 400km/hr railway has resulted in a significant increase in costs. Wild, however, considered that HS2’s cost exceedances were mostly due to the cost control issues identified in the Stewart report.
While it may be the case that HS2 should not have been designed as a 400km/hr railway, it is not credible to dismiss this decision as zealotry without understanding and refuting the original case for this speed. The DfT representative on the panel should have known why this decision was taken and been able to advise the TSC accordingly.
North of Birmingham
The panel was also asked when there will be a decision on how the rail capacity constraints north of Birmingham will be addressed following the cancellation of HS2 Phase 2 to Manchester.
Hendy advised that when HS2 Phase 2 had been cancelled in October 2023, the consequence on the West Coast Main Line (WCML) north of Birmingham had not been considered and thus there were no alternative plans for the WCML. He stressed that he was very much aware that WCML capacity constraints needed to be resolved to drive the benefits of connectivity such as jobs and homes north of Birmingham. However, he didn’t feel that Government could contemplate progressing further WCML capacity improvements until it could prove that HS2 Phase 1 was under control.
He hoped the TSC could take comfort that the DfT was carefully considering what needs to be done including a review of the work done by the Mayors of Greater Manchester and the West Midlands.
Hendy advised the committee that he hoped to say more about this in a few months’ time. It is to be hoped that he can do so as the Parliamentary powers to construct a railway on the alignment of HS2 Phase 2a expire in February 2026. Also of note is the revelation in Wild’s letter to the Minister that HS2 Phase 1 will have passive provision for a new line as it will retain the spurs to the former Phase 2a and 2b sections.
Good work done
During the hearing, Wild often praised the work done by the HS2 team and its contractors. He stressed he was very proud of his HS2 team and that just because the project has failed its mission doesn’t mean that the project hasn’t got great resources including many talented younger engineers. Yet, he said, “we’ve ended up in a situation with HS2 locked in our own bureaucracy and my job is to move those really great young people to the front line.”
He noted that the three MWCC contracts are the biggest civil engineering contracts ever let in this country and felt their epic scale needs to be acknowledged. He considered that HS2 has some of the world’s best contractors who are doing extraordinary work to the required quality with 34,000 people out there working very hard to deliver the project with a good safety record.
Other panel members agreed. Over, for example, felt that it is crucially important that the efforts of everyone working on HS2 are recognised. Though the project has gone wrong at the systemic level, it is not the fault of these individuals who are doing a great job in very difficult conditions.
When it opens in 10 years or so, HS2 Phase 1 will do a great job of improving connectivity as well as relieving passenger and freight capacity on the southern part of the WCML. Despite its huge cost, and being over 10 years late, its eventual long-term benefits are likely to exceed its cost. However, until then the project will no doubt be subject to continued criticism.
In this respect, stakeholders, including Government ministers, need to reaffirm and advocate HS2’s benefits as the Stewart Review recommends.
Image credit: HS2