Minister emphases the need for tight controls on HS2 budget…

HS2 Minister Andrew Stephenson has revealed his concerns at the rate of cost increases on HS2 Phase 1 (London-Birmingham), despite its remaining within the contingency budget.

He told MPs on March 16 that HS2 Ltd is reporting £1.7 billion of “net potential future cost pressures” across the project, up by £400 million (from £1.3bn to £1.7bn) since October 2021.

“While these pressures are manageable, given the remaining contingency, I am nonetheless concerned at the rate of their increase. I expect HS2 Ltd to maintain its focus on delivery to the target cost,” said Stephenson.

He added: “The Department for Transport and HS2 Ltd are working to assess and mitigate the impact of global inflationary pressure on materials and labour supply on HS2, where short-term increases are being seen.”

The news is partly offset by £800m in savings and efficiencies in HS2 Ltd’s budget.

The savings mainly come from awarding the rolling stock contract under budget, contracting a common supplier for lifts and escalators, and savings in the acquisition of land and property. These have partly offset gross cost pressures.

Should the cost pressures materialise, HS2 Ltd will continue to draw on its £5.6bn contingency, provided for managing risk and uncertainties. It has so far drawn down £1.3bn, meaning that £4.3bn remains.

Of the £1.7bn potential cost pressures in addition to the £1.3bn contingency already used, key pressures are:

■ £800m for additional main works civils costs, due to additional design costs and slower than expected progress in some areas.

■ £400m over budget for HS2 Euston station. The change to a smaller, less complex, tenplatform single-stage delivery will “assist in addressing the cost pressure” as the updated station design is developed.

■ £200m over budget for changes to Network Rail infrastructure at Euston and Old Oak Common, required for the new HS2 stations.

■ A further £300m net cost pressures on other smaller parts of the programme.

Overall, HS2 remains within budget, said Stephenson.

The total budget for Phase 1 remains £44.6bn, comprising the £40.3bn target cost (including the £5.6bn contingency delegated to HS2 Ltd) and £4.3bn additional governmentretained contingency.

So far, £14.9bn of the £40.3bn Phase 1 target cost has been spent, with an additional £800m for land and property provisions. £12.7bn has been contracted and not been spent, with the remainder not yet under contract.

Meanwhile, HS2 protester activity, including the removal of encampments and protestrelated delays to the programme, has cost just under £122m - an increase of £42m from September 2021 to January 2022.

Stephenson said that HS2 Ltd “continues to work with its supply chain, local police forces and wider government to minimise the impact of unlawful protester activity”.