The UK’s next high-speed rail project was over budget before even breaking ground, but Nicole Badstuber argues that HS2 must go ahead to reap the benefit
At the publication of the House of Lords’ Economic Affairs Committee report, The Economics of High Speed 2, the committee’s chair, Lord Forsyth of Drumlean, concluded: “The costs of HS2 do not appear to be under control.”
The former chair of HS2, Sir Terry Morgan, agrees. “Something will have to give” on the project management triangle of time, cost and scope, he believes. Costs are spiralling upwards and Phase One, which links London and Birmingham, is now nearly five years late. There is therefore concern that the government will cancel Phase Two of the Y-network, which branches north of Birmingham to run to both Manchester and Leeds.
Lord Forsyth warned: “If costs overrun on the first phase of the project, there could be insufficient funding for the rest of the new railway. The northern sections of High Speed 2 must not be sacrificed to make up for overspending on the railway’s southern [between London and Birmingham] sections.”
The Economic Affairs Committee instead reiterated the cost-saving measures it had recommended in its previous, 2015 report: lowering the speed on the railway or starting it in west London rather than at Euston.
The strategic case for HS2 is based on capacity. The government aims to improve connectivity by providing more services and shorter journey times. The new HS2 network will add railway lines for use by fast, longer-distance services, freeing up capacity on existing rail lines to run more local, regional and commuter services.
As Financial Times journalist Gill Plimmer wrote in response to the price hike, “Few expected the costs to spiral out of control before a single metre of track had been laid.”
Although Phase One will reduce journey times between London and Birmingham, achieving more significant time savings will require the completion of Phase Two. That will cut journey times between London and Manchester from two hours to one, while trips between Birmingham and Newcastle will be reduced from nearly three hours to less than two. Journey times between Manchester and Birmingham will more than halve, dropping from 88 minutes to only 40.
Investment in the HS2 network will improve rail services for both long-distance and local rail users. But it has polarised opinion and anti-HS2 sentiment is striking a chord with politicians. Polling also suggests the new railway is unpopular with the public, particularly Conservative voters.
And so, at the end of August, the government announced an independently led government review into whether and how HS2 should proceed. The review will assess a range of characteristics, including benefits, impacts, affordability, deliverability and construction phasing. The review’s final report, which will inform the government’s decision about its next steps for the project, is due imminently. In the meantime, limited, largely preparatory work will continue on the project in parallel with the report’s work.
Projected costs for HS2 have ballooned. The government announced in September that the estimated price tag had soared by £26bn to £88bn – a 41% cost increase on previously published numbers. Political and financial problems have plagued the new railway line, initially sold as an alternative to expanding London’s Heathrow Airport and as an extension of the existing HS1 high-speed rail link to Europe. However, the current plans do not directly connect HS2 to either.
Deadlines for running services have also been blown apart. Trains were due to start running between London and Birmingham in 2026, but that date has been revised back to 2028-2031. They also will not initially run to the city centre termini of London Euston and Birmingham New Street but to London Old Oak Common and Birmingham Curzon Street. Services on the two branches north of Birmingham are also delayed at least five years and are now due in 2038-2040, instead of late 2033. Phase Two itself is uncertain, as it requires parliament to pass legislation, which is not planned until 2023.
Building the fastest railway in the world, with two-thirds of the route from London to Birmingham in tunnels, was always an ambitious feat of engineering. But as Financial Times journalist Gill Plimmer wrote in response to the price hike, “Few expected the costs to spiral out of control before a single metre of track had been laid.”
However, there were warning signs that this ambitious ‘megaproject’ would be significantly over budget and delayed from the start. Across HS2 reporting, the most prominent and frequently quoted cost estimate was £55.7bn for the full network. The origin of this figure – approximately £64.8bn in 2019 prices – can be traced back to the 2013 Spending Review.
Importantly, however, £55.7bn was never the estimated cost of HS2 but how much funding was available for it. The new £88bn price tag announced in September is therefore the first official estimate in the six years since it was approved. The fact that no official cost estimate has been published in this time has shrouded the project in a veil of murkiness.
Flyvbjerg’s database of megaprojects shows that only 10-20% of megaprojects came in on budget, 10-20% were delivered on time and 10-20% demonstrated their promised benefits.
There has been no official announcement of cost increases either. However, there have been warning signs. Back in May 2016, the then-chancellor George Osborne warned of soaring project costs. This was a year before parliament legislated for Phase One. The National Audit Office (NAO) also reviewed HS2 in 2016 and found significantly more money than the agreed funding envelope would be needed to complete the full network – £64.9bn (roughly £73.2bn in 2019 prices).
Megaprojects – defined as very large, complex endeavours, typically costing more than US$1bn (£815m) – typically balloon in cost and falter in expectation. In 2011, the NAO reviewed the successful delivery of some 40 major government projects. It found that two-thirds were completed late, over budget or did not deliver the outcomes expected.
Research by Bent Flyvbjerg, professor of major programme management at the University of Oxford’s Saïd Business School, discovered even fewer megaprojects delivered their promised benefits, were on time and on budget. Flyvbjerg’s database of megaprojects shows that only 10-20% of megaprojects came in on budget, 10-20% were delivered on time and 10-20% demonstrated their promised benefits. The number of projects that delivered on all three criteria was less than 1%.
Earlier research by Aalborg University in Denmark found that for rail megaprojects specifically, actual costs are 45% higher on average than the estimated costs. It also found that a third of rail projects were between 40% and 60% over budget.
These failures may be the result of treating megaprojects as simply large projects scaled up. Megaprojects take many years to develop, plan and build. They involve many stakeholders and are expected to be transformational. Importantly, says Flyvbjerg, they are a “completely different breed of project in terms of their level of aspiration, stakeholder involvement, lead times, complexity and impact”. He says this important difference is often missed and conventional project management regimes are applied.
Instead, project managers who are reflective leaders and domain specialists are needed. Often, the delivery of megaprojects involves setting up, running and taking down temporary management organisations the size of billion-pound corporations. The establishment of new organisation and governance structures for these corporations is a staggering feat in its own right.
HS2 demonstrates all the hallmarks of a megaproject and the challenges of managing one, particularly unforeseen complexity leading to cost overruns and project delivery delays. The reasons cited for HS2’s cost overruns and delays are the need for an additional tunnel, ground conditions that were more complicated than expected, underestimated land and property values, and poor corporate governance.
HS2 demonstrates all the hallmarks of a megaproject and the challenges of managing one, particularly unforeseen complexity leading to cost overruns and project delivery delays
To appease disgruntled Conservative voters in the Chiltern Hills area, politicians committed to 50km of tunnels between London and Birmingham – two-thirds of the route. This would involve tunnelling through hundreds of different soil types including porous salt mines and chalky rubble. Soft and fine soils will require stabilisation with concrete support structures. These changes added costs to the project.
HS2 has been criticised for insufficiently budgeting for the unknown soil conditions and associated risk to schedule and cost. Criticism is specifically directed at its failure to investigate ground conditions and reliance on available studies. HS2 has defended its actions on the grounds that it “didn’t yet have the legal power to access land”. Yet, the ramifications of insufficient information about the ground conditions along HS2’s route are extensive.
To build Phase One of HS2, the government will need to acquire 70 square kilometres of land. Initially, £3.6bn was budgeted for this and according to the Financial Times, 900 homes, farms and properties have so far been bought at a cost of £2.2bn (2019 prices).
However, NAO estimated in 2018 that the cost of purchasing land and property along the route would be higher than that initial figure, as a result of rises in property values and the introduction of additional compensation schemes.
Collectively, megaprojects’ persistent underperformance on delivering benefits and their additional costs undermine the value and validity of the methods used to appraise them. Flyvbjerg concludes that the scale of inaccuracy in forecasts suggests that projects are intentionally being put forward with misleading cost estimates. Simply put, projects are presented in a favourable light to get them approved, thereby misleading politicians and the public about the actual costs of the project.
An NAO review of the delivery of public sector projects supports his view. It found that optimism bias was adversely affecting projects, leading to an over-optimistic view of costs and benefits. It too concluded that the optimism bias was strategically motivated, to increase the likelihood of a project being awarded funding.
Optimism bias was adversely affecting projects, leading to an over‑optimistic view of costs and benefits. It too concluded that the optimism bias was strategically motivated, to increase the likelihood of a project being awarded funding
Despite their poor record, megaprojects remain a popular endeavour. Flyvbjerg and colleagues have identified four drivers fuelling the development of megaprojects: technological, political, economic and aesthetic. Technological refers to engineers’ and technologists’ excitement at building the next biggest, tallest and fastest project. Political is politicians’ excitement to build a monument to themselves and leave a legacy. Economic is the promise of jobs and business. Finally, aesthetic is the gratification of building good, iconic design.
Arguably, all four are present in the case of HS2: to build the fastest railway in the world, to demonstrate politicians’ commitment to infrastructure development, to create new jobs in designing, constructing and running the new railway, and to build Britain’s high-speed railway network.
But megaprojects’ poor records don’t obviate the need for them. The government’s own analysis found that capacity issues in the North of England could not be addressed by train improvements and enhancements, and that West Coast Main Line train services were unlikely to improve without major investment. The completion of the full HS2 network will enable more local rail services to be run between cities and towns in the North of England. Crowding and infrequent shorter-distance services are not a problem limited to London and Birmingham. It is imperative that the construction of HS2 is not halted before Phase Two is complete.
Nicole Badstuber is an urban infrastructure researcher at the Centre for Digital Built Britain and University of Cambridge