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HS2 enabling works £400m over budget

14 Oct 20 Just a month after construction formally started on phase one of the HS2 railway project, a quarter of the money has already been spent and it is running £800m over budget.

The prime minister made a site visit last month to declare offical start of construction
The prime minister made a site visit last month to declare offical start of construction

HS2 minister Andrew Stephenson told the House of Commons that of the £40.3bn that HS2 Ltd expects construction of phase one to cost (2019 prices), £9.6bn has been spent to date.

A further £11.5bn is contracted; and £13.9bn is yet to be contracted and remains an HS2 Ltd estimate.

Of course, enabling works have been going on for several years for the project, but it was only in April 2020 that the Department for Transport gave approval for HS2 Ltd to issue notice to proceed to the four main works civils contractors (MWCCs) and September when the official start of work was marked, with a site visit from the prime minister.

The total funding envelope for phase one has been set by government earlier this year at £44.6bn and the estimated cost for completing the full network was revised to a range of £72bn to £98bn.

HS2’s target cost of £40.3bn includes a contingency of £5.3bn for surprises.

HS2 Ltd is currently reporting “cost pressures” of £800m, the minister said in a written statement this week. “If not successfully remediated, these pressures will be drawn against the company’s delegated contingency.”

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The cost pressures are 50% due to overruns on enabling works that have been underway since 2017 and in some areas have encountered more significant challenges than anticipated, such as the need to safely remove more asbestos than expected, the minister said, resulting in increased scope and duration. HS2 Ltd expects these additional costs to be around £400m.

Another £400m is the “cost pressure” at Euston Station, where the baseline scheme is still being developed.  “As this remains at the design stage, work is under way to consider opportunities, efficiencies and scope reductions in order to redress these pressures,” the minister said.

The minister said that HS2 Ltd’s £40.3bn target cost had been made even less certain because the impact of Covid-19 and new working arrangements had not yet been calculated, but he was confident that it would not bust the total funding envelope.  “This projection remains uncertain at this early stage in the project’s lifecycle (as with all major infrastructure projects) and does not yet reflect the impact of Covid,” he said. “HS2 Ltd is expected to provide its estimate of the Covid impact within the next six months. Any cost changes will be contained within the funding envelope using the contingency already assigned.”

He added: “The overall response to Covid by HS2 Ltd and its construction partners has been positive with the rapid implementation of safe working practices to protect the public and workers and the re-opening of the majority of sites after a safety review. However, some works have been delayed and at some sites Covid-safe practices have necessarily reduced productivity to a limited degree.”

Phase one of HS2, between London and Birmingham, is expected to start train services sometime between 2029 and 2033. The range for initial opening of services from the Euston terminus remains 2031-2036, subject to further work on the study of design and delivery options.

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