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Business groups raise concerns over HS2 review

While HS2 may have accumulated enemies in the House of Commons – and among wealthy homeowners in Buckinghamshire villages where they normally weigh the Conservative votes, rather than count them – the project has received solid support from businesses.

The main business case for the £56 billion project is not so much a reduction in journey times, as is often assumed, but that the new link will ease congestion on the West Coast mainline which connects Glasgow with London via Manchester and Birmingham.

An extra train line would not only benefit passengers, businesses argue, but would massively expand freight capacity on Britain’s railways, as well as easing congestion on motorways such as the M1, M5 and M6.

So it is unsurprising that business organisations have reacted with concern to today’s review into the future of HS2.

Tom Thackray, the CBI’s director of infrastructure, said: “The business message on HS2 is clear-cut – back it, build it, benefit from it. While it’s always helpful to review major projects like HS2 to ensure that value for money is delivered, the business case is well known.


“The approval of HS2 phase one led to record levels of foreign direct Investment in the west Midlands. We have seen and are continuing to see similar benefits right across the proposed route.

Thackray said that the business trade group firmly believed that committing to HS2 in full, once and for all, would “spread the flow of investment across the Midlands, the north of England and into Scotland.”

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“The current poor connectivity in the North is a major obstacle to encouraging companies from growing in the region and is a barrier to inward investment.”

Mike Cherry, national chairman of the Federation of Small Businesses, added: “For the good of UK small firms and the economy as a whole, it’s vital that the HS2 project remains on track. The stop-start approach to major transport investment that’s held our economy back for decades has to end.

“Of course HS2 needs to represent value for money, and that starts with responsible procurement – bringing smaller firms into the supply chain wherever possible and paying them on time.

“HS2 should be seized by this government as an opportunity to back the small businesses that it so often claims to support, opening doors for them and setting the tone for future infrastructure projects. It would do well to remember that small firms bring a dynamism to supply chains that big corporates struggle to match.

“Wider job creation, inward investment and transport projects across the north of England and Midlands hinge on HS2’s completion. This project is not simply a nice to have. Done right, it will lay the foundations for a truly balanced UK economy.”

The news can hardly, however, come as a surprise. Boris Johnson made clear during the Conservative leadership election that he was sceptical about HS2, although the new Prime Minister will not have failed to notice – during the regional hustings – the strong levels of support for HS2 from business leaders in the north.

Image: A report published in June found that 99% of more than 5,000 northern business leaders were supportive of Northern Powerhouse Rail

A report published in June by the Northern Powerhouse Partnership, the think-tank founded by the former Chancellor George Osborne, found that 99% of more than 5,000 northern business leaders were supportive of Northern Powerhouse Rail, the east-west rail link connecting Liverpool with Hull via Manchester and Leeds, a project that cannot go ahead without HS2.

More than 100 high-profile business leaders also signed a letter to the Financial Times in May in which they described HS2 as “an investment in the country’s future”.

The signatories included Tony Wood, chief executive of the £5 billion engineering group Meggitt; David Duffy, chief executive of Virgin Money, Yorkshire Bank and Clydesdale Bank’s owner CYBG; Ian Stuart, chief executive of HSBC UK and Charlie Cornish, chief executive of Manchester Airports Group, as well as Gary Neville, the former England and Manchester United footballer, who owns a number of property and hotel interests.

They wrote: “[HS2 is] already delivering benefits around the UK: regeneration in Birmingham, Leeds and Manchester and their city regions; greater connectivity to the north east; investment in the east Midlands; businesses relocating to our great cities of the north and the Midlands; and thousands of jobs being created around the UK.

“As leading employers, we note that HS2 expects the project to deliver £92 billion in benefits as well as 500,000 new jobs and, crucially, 90,000 new homes by the time it is completed in 2033.”

Yet there are also some strong voices ranged against the link.

Lord Macpherson, the former permanent secretary at HM Treasury who under Mr Osborne signed off on the initial funding for HS2, told the Sunday Telegraph in March this year that the project should be scrapped.

He said: “HS2 has always had a low economic return compared with other transport projects. Its costs are rising and…it is likely to look a little obsolete when it is fully on stream in the 2030s, not least because of the transformational effect of driverless cars.

“Public investment will be critical to driving up performance in a post-Brexit UK. But resources are limited. And so it needs to be allocated on the basis of rigorous cost-benefit analysis. HS2 fails that test.”

That was also the conclusion of the National Audit Office (NAO) which, as long ago as 2013, said phase one of HS2, the link between Birmingham and London, would deliver just £1.40 worth of benefits for every £1 invested – getting on for half the sum originally projected in 2011 by the Department for Transport (DfT) which, the NAO said, had been overly optimistic in its forecasts.

Indeed, Britain’s public spending watchdog has been one of HS2’s doughiest critics, having on several occasions flagged cost over-runs involved in the project. Most notable of these has been the soaring cost of buying land on the rail link – which trebled to £3.3 billion following changes to the route – but the NAO’s criticisms even extended to HS2’s making of redundancy payments that were in breach of caps operating in the public sector.

More recently, though, Sir Amayas Morse, the outgoing auditor-general at the NAO, has warned that so much money and work has already been sunk into HS2 that scrapping the project entirely would be “very difficult”, suggesting the plug be pulled once the initial phase between Birmingham and London has been constructed.

Other vocal critics of the project include the economic affairs committee of the House of Lords which, earlier this year, said the money would be better spent improving transport links in the north.

Its members include Lord Darling, the former Labour Chancellor, Lord Livingston, the former BT chief executive and former Trade Minister; Baroness Harding, the former chief executive of TalkTalk Telecom and Lord Burns, one of Lord Macpherson’s predecessors at HM Treasury.

The main factor which has undermined the business case for HS2 is the balance between the cost of building it and the benefits delivered by it. The NAO, in its assessment, suggested the DfT has over-estimated the benefits.

Since then, the cost of the project has spiralled, with Allan Cook, the chairman of HS2, last month warning the DfT that it could not be delivered for £56 billion and that the ultimate cost could be up to £30 billion higher. That would take it close to the £92 billion benefits that the line is expected to deliver.

Those soaring costs may partly be explained by the revolving doors at HS2. Since December 2016 it has lost a chief executive, Simon Kirby; two chairmen, Sir David Higgins and Sir Terry Morgan – the latter of whom lasted just four months; a head of finance, Steve Allen; a director-general, David Prout; and Paul Griffiths, who was to have headed the second phase of the project. During the year to last September, a third of HS2’s board was replaced.

With that level of upheaval, perhaps due to a lack of oversight from the DfT, traditionally one of Whitehall’s most accident-prone departments, HS2’s business supporters will need to make the case for it more strongly than ever, assuming Mr Johnson does not kill the project.


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