HS2 minister admits concern over speed of cost rises

His latest assessment of progress and spending comes as HS2 has spent just over a third of the target cost.

Since HS2’s watchdog MP last produced his six-month progress report for the Government actual and potential additional costs have jumped by a further £ 900m.

The hike comes from a £ 500m increase in contingency drawdown plus an extra £ 400m from potential further cost pressures.

“Whilst these pressures are manageable within the target cost given the remaining contingency, I am nonetheless concerned at the rate of their increase,” he admitted.

“I expect HS2 to maintain its focus on delivery to the target cost.”

So far a total of £ 1.3bn has been drawn down from the £ 5.6bn project contingency fund, leaving £ 4.3bn in reserve.

He revealed that the Government and HS2 were currently working to assess and mitigate the impact of ‘short-term’ global inflationary pressure on materials and labor supply on the program.

Stephenson said £ 800m of the extra cost pressures arose from additional main works civils costs due to further design costs and slower than expected progress in some areas.

An extra £ 400m will be needed for the Euston station HS2 terminus. Although Stephenson said he hoped the move to a smaller, less complex 10-platform single-stage delivery strategy would reduce this identfied extra spend.

An extra £ 200m will be needed for changes to Network Rail infrastructure at Euston and Old Oak Common, while an extra £ 300m is needed for other parts of the overall program.

HS2 has yet to formally cost in the impact of Covid 19 working restrictions. Its assessment of the likely financial impact of the pandemic remains between £ 400m and £ 700m.

Formal claims will be subject to government scrutiny and will require formal approval from the Treasury before funds from government-retained contingency can be allocated.

Over the next 6 months, HS2 will continue the ramp-up of construction work, launch the fourth TBM on the program to start excavation of the London tunnels and we will see HS2 award a contract for the construction of the Interchange Station.

On Phase 2a, focus will be on progressing environmental and enabling work, early land acquisitions plus the procurement for the design delivery partner and progressing the procurement for the main works civils framework.

To date, out of the Phase One target cost of £ 40.3bn, £ 14.9bn has been spent, with an additional £ 0.8bn for land and property provisions. £ 12.7bn has been contracted and has not been spent, with the remaining amount not yet under contract.

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