HS2 Cancellation Before 2030? Britain’s Monumental Infrastructure Fiasco To Be Derailed In The Next Five Years?
The Final Business Case for HS2 Phase 1 (London to Birmingham) put the Benefit to Cost Ratio (BCR) at 1.2. In other words, for each £1 of taxpayers’ funds invested, benefits of £1.20 would be generated. A BCR of 1.2 is classified as ‘Low’ value for money by the Treasury – most projects are funded at 1.7 or more. This BCR was based on capital costs of £36.6bn.
To date, around £35bn has been thrown at HS2. Recent media coverage suggests that costs for Phase 1, not including Euston Station or tunnels, are now around £80bn. Mark Wild, HS2’s CEO, recently commented that the project was around one-third complete, suggesting a final figure of £105bn. Excluding what has already been spent and just considering the £45bn to £70bn that it might take to complete the project, the BCR drops below 1. On this basis, continuing HS2 Phase 1 simply makes no economic sense.
The current Labour government is committed to continuing Phase 1. In the recent spending review, they announced a further £32.4bn of taxpayers’ money (current prices) to be allocated to HS2 to maintain spending up to 2030.
So how likely is it that HS2 will be cancelled?
A year ago I would have said very unlikely – probably less than 5%. I would now put this much higher at 30%, for the following reasons:
In the 2024 manifesto, the Reform party stated that they would cancel HS2 within 100 days of entering office. Recent UK-wide polls show Reform UK leading national voting intention by a clear margin.
HS2 is essentially being funded through government borrowing. Many media commentators are noting the difficult position that the UK is in, having one of the highest public sector debts and highest borrowing costs of any advanced economy.
The anticipated tax increases from the October budget are likely to be highly unpopular and could hinder economic growth. In my opinion, a political, geopolitical, or financial crisis could necessitate urgent measures to reduce public spending. Cancelling HS2 would cut expenditures by £7 billion annually.
The Bottom Line
While not guaranteed, the cancellation of HS2 is a potential outcome that merits preparation. We need strong ideas that generate revenue and benefit society for an asset that will have cost £65bn to build by 2029.
What likelihood do you put on HS2 being cancelled before 2030? Let us know in the comments…