HS2 to boost UK economy 'by £15bn a year' says report

 

Transport Secretary Patrick McLoughlin: "The main reason we need HS2 is a heart bypass for the clogged arteries of our transport system"

Related Stories

A new report says the HS2 rail project could boost the UK economy by £15bn a year.

Transport Secretary Patrick McLoughlin presented the findings as he reasserted the case for the new rail line.

The report, from accountants KPMG, says that regions outside London will be the biggest beneficiaries of the new service.

But the economic boost will not be felt until 2037, it says.

In a speech at the Institute of Civil Engineers, Mr McLoughlin argued that rejecting HS2 would amount to a "national loss of nerve".

Start Quote

KPMG is ignoring one of the fundamental causes of lacklustre growth in many parts of the UK, which is a shortage of skilled labour and of easily and readily developable land”

End Quote

HS2 was necessary because the "clogged arteries" of the nation's transport system needed a "heart bypass", he said.

But Mark Littlewood, director general of the Institute of Economic Affairs, told the BBC: "Any private investor would consider this to be a colossal waste of money.

"That is not to say that we don't need to improve capacity. Rail is an extraordinarily expensive way of doing that."

The government was asking UK taxpayers to take "a huge gamble on their extremely dodgy numbers", he added.

'Stronger'

Mr McLoughlin argued that the benefits of HS2 were not simply faster journey times and new jobs, but up to 500,000 fewer lorry journeys a day on the country's roads, according to a separate report.

"High Speed Two will make Liverpool stronger. Manchester stronger. Leeds stronger. Britain stronger", he said.

"A £15bn annual boost to the economy. With the North and Midlands gaining at least double the benefit of the south."

Dismissing "scare stories" over the budget, he maintained that it would remain £42.6bn, with a contingency fund of £14.4bn.

But earlier this week, the Public Accounts Committee (PAC) criticised the scheme, saying: "So far, the Department [of Transport] has made decisions based on fragile numbers, out-of-date data and assumptions which do not reflect real life."

The committee also said there was no evidence the line would help the growth of regional cities and would instead draw even more business to London.

KPMG's report was commissioned by HS2 Ltd, which is a non-departmental public body wholly owned by the Department for Transport.

Report author Richard Threlfall, KPMG's head of infrastructure, said: "What I hope this work will do is put some new evidence into the debate, because what we've seen over the last few months is an awful lot of opinions and to be honest not a lot of evidence on the ground as to what effect this will have.

"And what our report shows, beyond any reasonable doubt, is that HS2 will deliver massive benefits to the UK economy."

Map showing the route of phase 1 & 2 of the proposed high-speed service
'Creaking'

John Longworth, director general of the British Chambers of Commerce, told the BBC: "Businesses up and down the country are absolutely convinced that this is a really important infrastructure project. It is one of the key infrastructure projects for the UK."

Analysis

This report tots up the benefits in a new way.

It analyses how better transport links have apparently fuelled business and productivity across various different cities, then applies that to HS2.

Saving time still plays a part, but it's a smaller part.

Instead, there's more importance placed on all those extra seats this scheme provides, not just on the new high speed trains, but on the rest of the rail network too (all those extra commuter services we're being promised).

Critics say the government is just moving the goalposts in a desperate bid to make its project look better.

He argued that simply renovating existing rail lines that were "creaking at the seams" would cause "chaos".

The latest study was commissioned by HS2 Ltd, the company responsible for developing and promoting the project.

It says Birmingham's economy could be boosted between 2.1% and 4.2% a year, while Manchester would benefit between 0.8% and 1.7%.

For Leeds, the boost would be 1.6% and London 0.5%.

Conservative MP Andrew Bridgen: "Enough is enough. This is tremendously bad value for money"

Wednesday's report calculates the benefits of the project in a different way from previous efforts.

Time saved is a less important part of the calculation. Instead, the report includes the benefits of extra seats, which means passengers will be able to work while travelling.

It also takes into account the reduction in congestion elsewhere on the network.

"The point about High Speed Two is that you won't have to travel on it to gain from the better transport system and economic growth it will support," he said.

The high-speed line would run between London and Birmingham from 2026 before being extended to Manchester and Leeds from 2033.

 

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +5

    Comment number 1050.

    Here in Mid-Norfolk, our nearest mainline station is Norwich, a terribly slow line in desperate need of upgrade. How is HS2 going to help us?

    I'm all for public transport, but it needs to be good, reliable and low cost - none of that applies here. It is quicker and cheaper to drive to north London than take the train.

  • rate this
    +3

    Comment number 1047.

    I'm really not against HS2 in principle, but the £32bn (oops sorry, now £42.6bn) price tag is completely unjustifiable. How on Earth can it cost such a crazy amount?
    Okay it was 2 decades ago, but even the massively over-buget Channel Tunnel was a tenth the price of HS2. And considering how quickly the price went up by £10bn, there's no chance it'll stay at £42.6bn. Where's the money going?

  • rate this
    +6

    Comment number 1040.

    I've just got off the Manchester to London 12:35 service. Travelled First Class Off-peak (about £120 return) so that I could work. There were three people in the carriage the entire way. Try working in economy - most seats don't have enough room to open a laptop. I have been off peak with economy packed as sardines and First half empty. Sort out how the train layout rather than waste £40b+.

  • rate this
    +5

    Comment number 1025.

    Why does everybody think that HS2 will increase capacity between London and Birmingham. It doesn't stop anywhere in between so is only of benefit to people going from one city centre to the other, those poor souls who live in-between will face the same slog as before, and if there is no significant reduction in commuter trains, how is it going to remove 500,000 lorry journeys.

  • rate this
    +51

    Comment number 714.

    I believe HS2 will shave 20mins off a London-Birmingham trip but the train won't terminate at New St Station in Birmingham. If you want to travel north from Brum before (or if) the line is extended you'll have to walk across town to get to New St. Which, by the time you reach the Platform in New St for you connection will probably take around...20 minutes! What a waste of money for no benefit.

 

Comments 5 of 14

 

More Business stories

RSS

Business Live

  1.  
    08:20: Rightmove
    Houses

    The property website is yet another business rewarding its investors handsomely. Shareholders' dividends will rise by 25% on the back of a 26% rise in pre-tax profits to £122m.

     
  2.  
    08:04: IAG - Willie Walsh BBC News Channel
    Willie Walsh

    IAG chief executive Willie Walsh points out the turnaround in Spanish airline Iberia, which was a drag on IAG from 2011 until the summer. "These are fantastic results, particularly the performance in Iberia, which I think has been a concern for a lot of people over the past few years", he tells BBC News. Iberia made an operating profit of €50m in 2014 compared to an operating loss of €166m the year before.

     
  3.  
    07:48: Lloyds Banking Group

    The bank has now written to owners of 2.7 million past PPI policies inviting them to lodge a claim. That is one reason why it is expecting a further 600,000 fresh claims this coming year.

     
  4.  
    07:42: Lloyds Banking Group
    Lloyds logo

    How much in total has the PPI scandal cost the bank in the past few years? An truly extraordinary £12bn. Not all of that is compensation. The administrative costs of sorting out the payments have been expensive too.

     
  5.  
    07:30: IAG results
    British Airways planes

    IAG raised its 2015 profit forecast by over 20% to 2.2bn euros for 2015, compared to the 1.8 billion euros it had said it was targeting. It says it has been helped by lower fuel costs. It expects to increase its capacity as well.

     
  6.  
    07:27: Lloyds Banking Group

    The bank has had to set aside another £2.2bn to cover the continued cost of repaying customers who were mis-sold payment protection insurance (PPI). That was on top of the £3.1bn the year before.

     
  7.  
    07:21: Lloyds Banking Group
    Antonio Horta-Osorio

    The massive payment to chief executive Antonio Horta-Osorio includes £1m in basic pay and an £800,000 bonus. The rest of the £11m comes from the payout of a "long term incentive plan" which gives him shares in the bank as a reward for steering it out of near insolvency.

     
  8.  
    07:19: IAG results

    Meanwhile, IAG's operating profit for the year to 31 December 2014 is £1.03bn, a 95.3% jump on the previous year.

     
  9.  
    07:15: Via Twitter Kamal Ahmed BBC business editor

    tweets: Breaking: Lloyds CEO Antonio Horta-Osorio total remuneration package will total £11m after shares rise by 193% since 2012.

     
  10.  
    07:10: IAG results

    British Airways owner IAG made a profit before tax from continuing operations of £828m, it says.

     
  11.  
    07:06: Lloyds Banking Group

    The dividend will be 0.75p per share, totalling £535m, which will go to three million shareholders. And that means £130m goes to the government.

     
  12.  
    07:02: Lloyds Banking Group

    The annual results are out. It has announced pre-tax profits of £1.8bn - up from £415m a year ago - and will indeed resume paying a dividend to shareholders.

     
  13.  
    06:50: Lloyds Banking Group BBC Radio 4

    William Wright of capital markets think-tank New Financial tells the Today programme that it was turning out to be a turbulent week for banks: "We've seen continued tax scandals at HSBC, continued restructuring at RBS, all change at the top of Standard Chartered - next week no doubt with Barclays we are going to see more restructuring."

     
  14.  
    06:41: Rising rents
    Houses

    Demand for rental properties is still driving up rents in the private sector. So says Sequence, a network of 300 letting agencies. It reckons that the average monthly rent outside London rose by 5% in the past year - and in London by 7%. "Large cities in particular are seeing a lot of activity as employment increases," it says.

     
  15.  
    06:28: Lloyds Banking Group Radio 5 live
    Lloyds Bank bank branch

    Lloyds is expected to announce profits of around £2bn, but banking analyst Alex Potter tells Wake Up to Money that the dividend resuming is the real indicator for a return to health. "Actually, an awful lot of [investment] funds haven't been able to buy Lloyds shares at all while they haven't been paying a dividend, so, actually just the allowance of those potential shareholders onto the [share] register again is going to be a pretty good thing."

     
  16.  
    06:19: Pension tax relief

    Will Labour suggest cutting pension tax relief for high earners? It seems this may be proposed by Ed Miliband when he speaks later today on how Labour might cut university tuition fees.

     
  17.  
    06:09: IAG results Radio 5 live
    British Airways plane

    We should look forward to hearing strong results for British Airways owner IAG, according to aviation consultant John Strickland. "We should expect to hear a big jump in profitability", he says on Wake up to Money, because the firm is "in a very solid state".

     
  18.  
    06:00: Ian Pollock Business reporter, BBC News

    Good morning. It's Friday. Always a good day as far as I'm concerned. Oh, and the Land Registry's house price figures for England and Wales will be out later this morning.

     
  19.  
    06:00: Good morning Tom Espiner Business reporter

    Some interesting stories coming up today. Expect full year results from Lloyds Banking Group, which is expected to resume paying a dividend to shareholders for the first time since the financial crisis in 2008. British Airways owner IAG is to post its full year results too.

     

Features

Try our new site and tell us what you think. Learn more
Take me there

Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.