U.K. High Speed Rail Is Over Budget and Delayed, Watchdog Says

(Bloomberg) -- The U.K.’s HS2 High Speed Rail project linking London to northern England is behind schedule and over budget, the government spending watchdog said, underlining the difficult decision ministers must take on whether to take it forward.

Latest estimates show the project may cost as much as 88 billion pounds ($115 billion), eclipsing the initial price tag of 50 billion pounds, the National Audit Office said in a report Friday. The full line linking London to Manchester and Leeds via the West Midlands may not be operational until 2040, seven years later than planned, it said.

The watchdog criticized the Department for Transport, saying it hadn’t properly considered that HS2 “is a much larger and more challenging” to deliver than other infrastructure programs. NAO chief Gareth Davies urged the department and HS2 Ltd., the company set up to deliver the project, to “be transparent and provide realistic assessments of costs and completion dates as the program develops, recognizing the many risks to the successful delivery of the railway that remain.”

The report increases pressure on Prime Minister Boris Johnson’s administration, which plans to decide soon whether to proceed with HS2, which was first mooted in 2009 and has proven deeply unpopular with communities along its route. Some members of the premier’s ruling Conservative Party say the rail link is vital to spread prosperity and jobs to northern cities, while other say the vast sum of money could be better spent on local links.

Decision Time

HS2 Ltd. said the cost and deadline overruns had already been revealed by its own stock-take last year, and that ministers now have “robust” cost estimates for the first phase, linking London to the Midlands. “If the government decides to proceed, HS2 Ltd. has a highly-skilled team in place ready to build Britain’s new state-of-the-art, low-carbon railway,” it said in a statement.

Transport Secretary Grant Shapps has said he’ll make the decision next month, after considering evidence from a government-commissioned study, the Oakervee Review. The review, led by Doug Oakervee, HS2’s former chairman, said there is “considerable risk” that the project’s price could rise to as much as 106 billion pounds, the Financial Times reported last week.

“We recognize that there have been significant underestimations of both the cost and schedule of HS2 in the past which is why we commissioned the Oakervee review to provide advice on whether and how to proceed with HS2,” the Department for Transport said in an emailed response to the NAO report.

The review has yet to be published, but its former deputy chief, the Labour peer Tony Gueterbock, earlier this month published a dissenting review, putting the cost at 107 billion pounds, but saying 50 billion pounds could be saved.

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net

To contact the editors responsible for this story: Tim Ross at tross54@bloomberg.net, Robert Jameson

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