Last month the Department of Transport put construction of a new HS2 station in central London on hold for at least two years in the hope of finding ways to cut costs.
The budget for the planned HS2 Euston station is £2.6bn; latest estimates are that it would cost £4.8bn (2019 prices) if built now. With work now paused for at least two years, costs are likely only to rise.
A National Audit Office (NAO) report out today says that the two-year pause in new construction will see spending deferred in the short-term but inevitably lead to additional costs and potentially an overall increase in costs in the long-term. This is due to costs associated with stopping and re-starting work, contractual changes and managing the project for longer, it says.
The NAO says that it time for the Department for Transport (DfT) and HS2 Ltd to get a grip and rethink what they are trying to do at Euston. Plans for the station have already been re-set before, but costs have always gone up as a result, not down.
In January 2020 the NAO reported that the work at Euston was more complex than originally anticipated and that there was uncertainty over the HS2 station design.
The following month the Oakervee Review raised concerns about the design of the HS2 Euston station and concluded that the existing design was unsatisfactory.
In April 2020 HS2 Ltd set a budget of £2.6bn for Euston station but by June the forecast cost was £4.4bn.
In November 2020, the DfT instructed HS2 Ltd to pause construction on the 11-platform design to begin work on a new 10-platform plan. These new plans are now £400m more expensive than the previous 11-platform design. In autumn 2021 the DfTt also directed HS2 Ltd to integrate more closely with Network Rail's redevelopment of the existing rail station and confirmed the extent of the surrounding commercial and residential developments. Much of the previous design work was then scrapped, costing another £106m.
To help with this integration, and in response to Douglas Oakervee’s recommendations, in December 2021 the DfT formally established the Euston Partnership to bring together the different bodies involved with projects on the Euston site, including delivery of HS2 Euston station.
By the end of December 2022 HS2 Ltd had spent more than £2bn on the HS2 Euston station and its approaches, including design, land, and preparatory works. The land purchases and preparatory works cost £1.5bn and were funded from the wider HS2 budget. Budget pressures on HS2 Euston station have now been compounded by inflationary pressures across DfT's capital programme.
The NAO report recommends the DfT works with the Euston Partnership, HS2 Ltd, Network Rail, Lendlease and local partners to reassess the expectations for the HS2 Euston project, its budget, and the public benefits. It also suggests setting out clear aims and measures as part of the programme reset and applying the lessons it has learned to HS2 Manchester stations and other parts of the programme.
Gareth Davies, the head of the NAO said: "Government is once again having to revise plans for Euston HS2. Clearly, the 2020 reset of the station design has not succeeded. DfT and HS2 Ltd have not been able to develop an affordable scope that is integrated with other activity at Euston, despite their focus on costs and governance since 2020. Recent high inflation has added to the challenge.
"The March 2023 announcement by the transport secretary pausing new construction work should now give DfT and HS2 Ltd the necessary time to put the HS2 Euston project on a more realistic and stable footing. However, the deferral of spending to manage inflationary pressures will lead to additional costs and potentially a more expensive project overall, and that will need to be managed closely."
Meg Hillier MP, chair of the House of Commons public accounts committee, said: “Attempts to reset the High Speed 2 Euston Station have failed. It is still unaffordable and no further forward than it was three years ago. Today’s NAO report show that the redesigned station would have cost nearly double what was budgeted. The delays to fix this will be felt not only by the taxpayer, but will continue to disrupt people and businesses around Euston. Department for Transport and High Speed Two Ltd have wasted enough time and money. They must get Euston right next time or risk squandering what benefits remain.”
The team developing the plans for the new Euston station is made up of Arup, WSP, Grimshaw, Haptic and LDA Design, working into HS2’s main contractor for the station build, Mace Dragados JV (MDJV).
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