With the HS2 high speed rail link under review, LGH looks at what this could mean for the construction industry as a whole and how it could impact LGH clients in both infrastructure and other sectors.

The high speed, north-south rail link, HS2, has had a troubled history since it was first approved by Parliament in 2017. Britain’s second high speed link, after the London to Channel Tunnel link, the proposed route connects London with Birmingham, and Manchester to Leeds, with the aim of sharing opportunities, investment, and tackling the growing north/south divide.

However, just two years into the project, the Government has commissioned an independent review, chaired by Douglas Oakervee, to consider if the project is still viable and value for money. This review has already suggested that the project is well over budget and is likely to cost somewhere between £72bn and £78bn, compared to the original forecast of £56bn. The project is also running well behind schedule, with the review suggesting that the opening date for the first phase, London to Birmingham, is more likely to be 2028-2031, rather than the original date of 2026.

The rising costs and extending deadlines have given rise to calls for the project to be scrapped, prompting 24 leading construction companies to sign a letter to the Oakervee review stating how important HS2 is to the British economy and why the project should continue. The letter explains that the cancellation would put 9000 jobs at risk and send the wrong message to international investors, stating: ‘At a time when the country is looking to demonstrate its post-Brexit credentials,’ the letter asks, ‘what signal would it send if we cancelled our highest-profile infrastructure project?’

The letter further explains how uncertainty surrounding the project has already driven up costs for UK constructors, and that cancellation would only make things worse. ‘It must also be borne in mind how the political uncertainty surrounding HS2 adds to the costs of bidding, driving up costs in the UK infrastructure market,’ the letter says. ‘By now, members have spent well over £100m bidding for HS2 contracts. If HS2 is cancelled now, future construction projects across the piece will unfortunately attract an added risk premium. UK construction will cost more.’

As a major stakeholder in the UK infrastructure industry, LGH support the concerns of the signatories. The costs of bidding for HS2 work will need to be absorbed by the industry if the project is ultimately cancelled as a result of the review, and this will inevitably lead to higher costs for other clients.

At LGH, we believe that HS2 is not only important in connecting our country, but it is also a significant showcase for the railway building industry, which began right here in Britain’s industrial north with Stephenson’s Rocket. It seems only right that the railways should continue to bring prosperity to the north through HS2, and we support our industry colleagues in pushing for the project to continue. As the letter says, without it, construction will cost more.