Posts

Last week the government awarded £6.6bn in contracts to build the new high-speed HS2 railway between London and Birmingham, to companies including crisis-ridden construction firm Carillion.

Construction work is due to begin next year on new stations, tunnels, embankments and viaducts on the London to Birmingham line, which forms the first phase of the controversial HS2 project. The civil engineering alone is expected to create 16,000 jobs.

It was welcomed as a “shot in the arm for Brexit Britain, providing thousands of jobs and billions investment that helps close the north-south divide,” but is that really the case?

According to CMF Capital’s John Mulheron, perhaps more worrying is the budget to deliver and whether it will support the vision of wider UK growth and prosperity. “The figures are eye-watering and the debate on whether HS2 is value for money a hot topic. Back in January 2012 £32.7bn was set aside for the total project. That figure now stands at £55.7bn.”

“Opponents have warned that the government is underestimating the costs, and that construction has already been delayed. The overall budget was revised up, but estimates drawn up on behalf of Lord Berkeley, chairman of the Rail Freight Group, suggested it could be as high as £111bn which would be a serious overspend and bring into question its value for money.” Commented Mulheron.

Lord Berkeley’s calculation was produced by Michael Byng, an expert for the Department of Transport who devised the standard method used for Network Rail to cost projects. It essentially works out to £403m a mile to build, which is 15 times the ‘cost per mile’ compared to the latest French TGV project extension. The stretch from London Euston to Old Oak Common has escalated to £8.25bn alone.

Whilst that figure was dismissed as nonsense, it’s worth pointing out the Chris Grayling’s submitted budget doesn’t include trains – about £7bn of new ‘state of the art’ rolling stock is needed. With the Government’s focus on Brexit negotiations, the fall-out from Grenfell and the fall-outs within the cabinet, it seems wise to urgently assign a few more bean counters to Grayling’s team for a little more diligence. Diligence to date has cost about £2bn in planning fee’s alone – nice work if you can get it.

So, what are the reasons for the spiralling costs? “The UK is densely populated with high degrees of home ownership (for those over 35 years old) and a high use of the railway infrastructure. All of which makes the price of land and the cost of disruption very expensive. If this was China or Russia the bulldozers would simply pile through. Fortunately, here people have rights and they are prepared to dig their heels in over them, this is likely to slow progress even further.” Said the CMF Capital Managing Director.

Whilst HS2 will create direct engineering and construction jobs, it will also impact employment in the short term. As homes get demolished local business communities that relied on their weekly spend will go under. In a poll, back in November last year an overwhelming 77% of the public would prefer the billions being spent on HS2 to go to the NHS and public services. No doubt given the latest crime figures that percentage might be a touch higher.

Looking at the proposed phase 2 routes also unveiled this week, the obvious omission is there is still no plan to join Manchester to Leeds or Leeds to the North East. The M62 is a daily carpark and the rail network linking these key cities frankly embarrassing.

Transport for the North, the body set up to deliver new infrastructure argues that by just improving transport connections across the Pennines – halving the Leeds to Manchester journey to 30mins – it would bring greater economic benefit than the high-speed link to London ever could. A five-fold boost to rail travel by 2050 could add £100bn to the region’s economy and create 850,000 new jobs.

“The other ongoing argument is that whilst HS2 will increase capacity to our current creaking Victorian network, it will simply make it quicker to travel to London and not benefit the northern powerhouse regions. That phrase that has all but disappeared from Tory manifestos since George Osbourne was told to get a new handful of jobs.” Commented Mulheron.

With businesses scrambling to promote themselves to a wider global audience in the wake of Brexit, it’s no wonder the north of England, with a GDP of £350bn – equivalent to the 21st largest economy in the world and exports 19% of the UK total continually feels like London’s second cousin twice removed. Expanding Heathrow at vast cost is another example of a London centric approach to growth and there are no plans for HS2 to link up to the airport.

Whilst the phrase Northern Powerhouse might have died, the region’s revival goes on. Aerospace, manufacturing, engineering and digital industries are growing at pace. The regional purchasing managers’ surveys show growth faster than the national average. But it’s still not shifting the ‘productivity needle’. Which, is what ministers and economists are pinning on HS2 to help solve.

“As ever, there is no one silver bullet and we need more immediate solutions than a project set to take decades to complete. Currently, not a single metre of track has been laid. To compete in a global economy the region needs to take advantage of new trading opportunities beyond Europe. There is capacity at Manchester and Leeds airports, so opening new trans-Atlantic or Asian routes would send an instant signal that we’re open to business across the country.” Concluded Mulheron.

The news that HS2 is progressing should be met with gentle applause, but more needs to be done in the short term to build confidence that in turn fuels investment. One final point to note, HS2’s announcement coincided with Elon Musk receiving verbal approval from the US Government to take his Hyperloop concept to the next stage.

Journey times from Washington to New York City would be around 29mins. Edinburgh to London, phase one of his European ‘Hyperloop One’ would be about 50mins of travel. Given the pace at which HS2 is likely to progress, Musk might still beat us to the ticket barriers.

The winners of the major construction contracts for Britain’s new railway were announced today (17 July 2017), with the £6.6 billion contracts supporting 16,000 jobs across the country.

16,000 jobs will be supported through contract opportunities over the next 6 years.

The huge infrastructure investment covers the main civil engineering work on the first phase of HS2 between London and Birmingham – including construction of tunnels, bridges, embankments and viaducts.

Transport Secretary Chris Grayling announced the decision to award contracts today, which will mean the new high speed link reaching Birmingham by 2026.

Transport Secretary Chris Grayling said “This is a hugely important step in the construction of Britain’s new railway and underlines this government’s determination to deliver an economy that works for all.

“HS2 will deliver vital links between some of our country’s biggest cities, helping to drive economic growth and productivity in the north and midlands.

“As well as providing desperately needed new seats and better connecting our major cities, HS2 will help rebalance our economy.

“We will now get on with building the railway, while continuing to ensure affected communities get appropriate support and are treated with fairness, compassion and respect.”

David Higgins, Chairman of HS2 Ltd, added “This is a huge day for the HS2 project and for the country. These contracts will support 16,000 jobs here in Britain and will create opportunities for thousands of SMEs.

“HS2 was always designed to be much more than just a high speed railway and today we can see the opportunities it brings right around the country – spreading prosperity, acting as a catalyst for investment and rebalancing our economy 10 years before the railway even opens. Business now has the surety to invest with confidence to build a legacy for Britain.”

HS2 could carry more than 300,000 people a day. And with fast trains using the new line, there will be extra space for more trains on the existing rail network.

Benefits will be felt across the network with trains running as far as Scotland and the number of seats available out of Euston in peak hours more than doubled.

In total, construction of the full HS2 route to the north-west and Yorkshire will create up to 25,000 jobs and 2,000 apprenticeships. Another 3,000 people will operate HS2 and it is estimated that growth around new HS2 stations will create another 100,000 jobs.

2,000 apprenticeships will be created.

In February, Parliament granted powers to construct the Phase One route from London Euston to Birmingham, with the route opening in 2026.

The winning bidders to build the first phase of the route are:

Area South

Euston Tunnels and Approaches – SCS JV (Skanska Construction UK Ltd, Costain Ltd, STRABAG AG)
Northolt Tunnels – SCS JV (Skanska Construction UK Ltd, Costain Ltd, STRABAG AG)

Area Central

Chiltern Tunnels and Colne Valley Viaduct – Align JV (Bouygues Travaux Publics, VolkerFitzpatrick, Sir Robert McAlpine)
North Portal Chiltern Tunnels to Brackley – CEK JV (Carillion Construction Ltd, Eiffage Genie Civil SA, Kier Infrastructure and Overseas Ltd)
Brackley to South Portal of Long Itchington Wood Green Tunnel – CEK JV (Carillion Construction Ltd, Eiffage Genie Civil SA, Kier Infrastructure and Overseas Ltd)

Area North

Long Itchington Wood Green Tunnel to Delta Junction and Birmingham Spur – BBV JV (Balfour Beatty Group Ltd, VINCI Construction Grands Projets, VINCI Construction UK Ltd, VINCI Construction Terrassement)
Delta Junction to WCML Tie-In – BBV JV (Balfour Beatty Group Ltd, VINCI Construction Grands Projets, VINCI Construction UK Ltd, VINCI Construction Terrassement)
Preparatory works are already underway, with main construction work starting in 2018/19 following a period of detailed design work.

In addition, HS2 stations at Euston, Old Oak Common and in Birmingham will be central to HS2 and the work needed to develop designs is also well underway. Both the invitations to tender (ITTs) for the station design services contracts for all 4 Phase One stations and the invitation to participate in dialogue (ITPD) for the Euston Master Development Partner have been released to shortlisted bidders.

These are significant milestones which show how progress is continuing to deliver stations that will be embraced by the local communities, drive economic growth and provide seamless journeys for passengers.

The Transport Secretary will today publish a Bill to deliver the next phase of HS2, from the West Midlands to the West Coast Main Line south of Crewe.

This means – subject to Parliamentary approval – this part of the route can open in 2027, 6 years earlier than planned, to bring the benefits of HS2 to the north and Scotland sooner.

The Transport Secretary will also confirm the final Phase 2b route, from Crewe to Manchester and Birmingham to the East Midlands and Leeds. This phase will complete HS2 and unlock the transformative project’s full benefits for the country.

Following the news that the first major works contracts for High Speed 2 worth around £900m have been awarded to three consortia*, a survey conducted by the ITV Tonight programme into issues surrounding HS2 has found:

  • Only 15% feel that HS2 is worth £56bn
  • 58% don’t think it’s a price worth paying
  • 77% of people would prefer that the money was spent in other areas, like the NHS
  • Nearly three-quarters of people thought HS2 would lead to price rises for train tickets
  • 60% said they would not pay more to ride on HS2
  • 7% would be prepared to pay increased prices for the high speed line
  • 80% said they felt sympathy for people who may lose their homes to HS2, even though they may be compensated
  • 11% people thought the high speed rail link would benefit the majority of commuters
  • 23% are not aware that HS2 is being planned

Additionally, less than 20% of respondents thought they would use HS2 when built, and only a third of people feeling that HS2 will benefit the north.

Joe Rukin, Stop HS2 Campaign Manager responded “After six and a half years of trying to con people into thinking HS2 is a good idea, public support for this white elephant is at an all-time low. It’s clear the spin from Government isn’t working as not only do only 15% think it’ll be worth the money, they’ve also seen through the spin, with the vast majority thinking it won’t benefit commuters, it won’t benefit the north and it will lead to an increase in the cost of train tickets. Quite simply, no-one is buying the hype and it is time to cancel HS2 before it is too late.”

Penny Gaines, chair of Stop HS2 added “We have yet another survey that shows the British people don’t think HS2 is worth the £56 billion pound price tag. This is the same message as from numerous other surveys. People can see the downsides, they won’t use HS2 and they are worried that HS2 will mean increased fare prices on the trains they do use. With the Government’s intention that whoever gets the West Coast Main Line franchise will also run HS2 for the first few years, it is even more likely that conventional speed fares will go up.”

*North: LM JV (Laing O’Rourke Construction, J Murphy & Sons)
South: CS JV (Costain, Skanska Construction UK )
Central: Fusion JV (Morgan Sindall, BAM Nuttall, Ferrovial Agroman (UK)

‎Mayor of London, Sadiq Khan has criticised ministers for delaying the final decision of where to build a new runway in the South-East for up to a year.

The Mayor accused the Government of ‘causing unnecessary uncertainty for British businesses already struggling with Brexit.’

His comments came after Downing Street postponed a final decision on expanding Heathrow or Gatwick until late 2017.

The decision means Article 50 – the formal move triggering Britain’s exit from the European Union – is set to be taken before any final decision on airport capacity in the South East.

Khan said “The Government’s decision to yet again delay deciding where to build a new runway will cause unnecessary uncertainty for British businesses already struggling with Brexit.

“Now more than ever, businesses need certainty and stability in order to make investment decisions and to keep jobs in Britain. Instead they are getting dither and delay.

“Now it’s time to get on with building a new runway at Gatwick, which can be built quicker, cheaper, and without the years of legal and political battles that Heathrow clearly faces.”

The new Secretary of State for transport, pledged to continue backing HS2, following uncertainty around the project post-Brexit.

On a BBC Radio 4 interview, Chris Grayling promised not to scrap plans for high speed 2, despite suggestions having been made that HS2 is under threat of being cancelled by David Cameron and industry experts. Grayling said “I have no plans to back away from the HS2 project.”

Before the Referendum, in June, Prime Minister David Cameron addressed Yorkshire residents at the Yorkshire Post’s offices in Leeds, and warned of uncertainty for the project if Britain left the EU.

“If we stay in [the EU] all our plans are fully intact and that includes HS2, and what we have said about HS3, and the overall rail investment programme,” he said.

“If we come out, of course I’m sure we will want to try and maintain these important investments. But when you hear nine out of ten economists, the Bank of England, the Treasury, the IMF and now the National Institute [of Economic and Social Research] all saying our economy will be smaller and will generate less tax revenue, obviously that does threaten potentially some public spending programmes.”

In the interview, which took place on the BBC radio program “The World This Weekend”, the Transport Secretary explained that the importance of HS2 is two-fold; not only will it speed up transport links between the North and South, but it will also help meet an increasing infrastructural demand and ease congestion on overcrowded roads and trains.

Grayling said: “The thing that’s important for people to understand is that HS2 is not simply a speed project, it’s a capacity project. We have lines at the moment which have seen huge increases in the number of passengers, the amount of freight in recent years.”

“The west coast mainline, for example, is becoming really congested. It’s limiting the capacity of services to places like Northampton and Milton Keynes.

“Of course it makes sense, if we’re going to build a new railway line, for it to be a fast railway line, to reduce travel times from north to south. That’s logical.

“But actually we need a better transport system for the 21st century, and HS2 is part of increasing the capacity of our transport system.”

HS2 are planning to hold a competition for architects to submit their design ideas for some major stations along the route.

The four major stations that are offered in the competition include Euston and Curzon Street in the city of Birmingham.

Expected to cost in excess of £43 billion in total, HS2 has released the initial schedule for forthcoming expenditure, which in this case will go towards design work on Euston, Old Oak Common, Birmingham Interchange and Curzon Street stations.

The architect-led designs could see the plans for Euston taken back to the drawing board after the desgins by Grimshaw were widely criticised by both Camden council and the landowner of the Euston estate, Sydney & London Properties.

A spokesman for HS2 said “The first stages of the procurement process for the main stations contracts will begin towards the end of the year.”

“We are still at the early stages of agreeing the contract arrangements and it may be different for south and north stations due to programme/complexity.”

This news follows recent controversies regarding materials supply chains. Ministers have been loudly proclaiming that it is imperative that Whitehall departments specify British steel throughout the project in a desperate bid to help save struggling steelworks, however, it has recently been discovered that the office in charge of procurement does not hold a record of how much it currently purchases. A revelation that many feel is reckless and irresponsible, given the fact that the very future of the UK’s biggest steel plant hangs in the balance after Indian owner Tata Steel announced last week it wants to sell its loss-making UK operations.

The knock on effect of this also jeopardises the future security of the Port Talbot works in South Wales, with some estimates suggesting that over 40,000 jobs are at risk, including workers and staff at businesses reliant in the plant.

HS2 continues to power forward in an attempt to reunite the North and South in terms of wealth and health. However, how much damage will it do along the way?