£4.9bn of HS2 savings not achieved, says NAO

24 January 2020

Planned savings of £4.9bn in the HS2 project were not achieved, according to the National Audit Office (NAO).

In a progress update the NAO said HS2 identified £4.9bn of savings in 2016 to bring phase one of the project – the route between London and Birmingham –  into budget but “did not develop these further into a programme of activity to achieve them”.

The report said the overall cost of the project had been estimated at £65bn-88bn but the “total forecast cost for the programme is not yet clear”. A report leaked to The Financial Times said costs could rise to £106bn.

The NAO said: “In 2016, HS2 had plans which identified where the savings might be found, but it did not develop these further into a programme of activity to achieve them. 

“Analysis commissioned by the [Department for Transport] shows that elements assumed by HS2 to have the most efficiencies have seen some of the greatest cost increases.”

The NAO said that in 2017 the main civil construction costs on phase one were estimated at £5.8bn with cost efficiencies of £2bn. However costs in 2019 were calculated at £10.7bn. 

The report said HS2's commercial approach had “unintended consequences on forecast costs”.

The NAO said a combination of factors including higher-than-anticipated construction costs and concerns about risk following the collapse of Carillion, “meant that contractors created designs which were more conservative (and therefore less efficient) and increased their forecast prices to offset the financial risks of undertaking the works”.

The NAO said: “A review of international high-speed rail programmes indicated that UK infrastructure tends to be more expensive when compared with international schemes.”

The report also referred to work that found: “The cost of HS2 per kilometre was three to four times the cost of comparable projects in Europe.”

The NAO said that ensuring value for money in the project ahead would rely heavily on having good “organisational capability”, and while there had been improvements in some areas “risk management and assurance, project management and project controls were below target”.

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