UK’s High Speed Rail 2 unlikely to boost growth by itself

UK’s High Speed Rail 2 unlikely to boost growth by itself

It has not been a good month for High Speed Rail 2 (HS-2). The proposed upgrade to transport infrastructure that would connect London to Birmingham with a high-speed line running up to 250 mph by 2026, later branching out to Leeds and Manchester by 2032-3, has proven to be one of the most disputed transport policies.

Supporters argue it will boost the British economy, rebalance economic activity away from the current north-south divide and relieve the crushing burden on existing conventional railway lines. Opponents insist it will cause irreversible environmental harm to sensitive floodplains and green belt land in the South and the Midlands, reinforce the current London-centric British economy and divert funds from less glamorous transport projects (such as rolling out ultra-fast broadband or overhauling existing national and regional rail connections) that would provide a quicker and better return for businesses and the taxpayer.

Proposed routes for HS-2

Proposed routes for High Speed Rail 2

This debate has intensified after three events this October. First, the cost estimate of HS-2 increased from £41.7 billion to £51.1 billion, about £121 million per mile. As with all projects of this size, there is a possibility that the total cost may escalate further. A recent Institute for Economic Affairs report concluded that the final bill for HS-2, after factoring in local investment and efforts to mitigate environmental damage, could reach £80 billion.

Second, on the 8th October the Parliamentary Treasury Select Committee called on the government to formally reassess the project to address concerns with the cost-benefit forecast of HS-2 and the lack of a comprehensive economic case from the Department of Transport.

Third, a report by auditors KPMG revealed that the economic impact of HS-2 is unlikely to be felt until 2037, and that while some regions of the UK would benefit (with Greater London and the West Midlands being the big winners of £2.8 billion and £1.5 billion) other regions such as Scotland, Wales and East England could lose as much as 1-2 percent of their current GDP.

These findings have only made attempts to find a comprehensive and balanced assessment of the impact of HS-2 for the British economy a minefield for any interested taxpayer, consumer or investor. Due to the controversial nature of the project, sources and forecasts that simply are either for (the major political parties and local governments and business groups in the areas set to benefit) or against (local government organisations and grassroots associations that would bear the brunt of construction and/or little of the economic benefits) HS-2 are as plentiful as impartial studies and reports are rare. Most of these reports also consider HS-2 in isolation from wider factors that could determine the success or failure of HS-2 in terms of stimulating the British economy at the local and national level and providing an acceptable return on investment.

In this polarized atmosphere, the report from the Independent Transport Commission has come as a breath of fresh air. It concludes that HS-2 will be a net positive for the British transport infrastructure and economy only if it is incorporated into a wide-ranging and well-defined plan of wider regional development. When placed in this holistic framework, HS-2 would become a catalyst for further development and connectivity and rebalance the British economy. It would reduce the pressure on infrastructure and housing stock in the South by attracting businesses and employees away from London, while encouraging urban regeneration and private sector investment in the North.

Creating this framework will be no easy task, since it will have to incorporate hard-to-calculate factors such as skill shortages and opening up land for new business. How HS-2 can be integrated with local economies and existing infrastructure will also be a key issue, as regions and cities will have to identify and leverage their strengths to best exploit this new source of connectivity and investment. Finally, a delivery schedule for HS-2 from Westminster that is both effective and reliable while being responsive to the needs of local governments and businesses is essential to provide both the confidence necessary for stimulating investment and crafting visions on how the opportunities that HS-2 will bring can be exploited.

The current malaise in HS-2 planning seems more to condemn a failure of presentation and joined-up thinking than of the project itself. A HS-2 project that is presented not as a mere engineering project but as a catalyst for unprecedented development across a whole range of geographic areas and business sectors will secure support at the regional level and extend the benefits of HS-2 far beyond its planned route. By itself, HS-2 holds little potential for growth and rebalancing of the British economy.

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