National Audit Office Warns of Higher HS2 Costs Due to Euston Delays

The National Audit Office (NAO) has released a report evaluating whether the Department for Transport (DfT) and HS2 Ltd are in a position to effectively manage the value-for-money risks associated with connecting HS2 to Euston station.

The High Speed Two: Euston report responds to the government’s recent announcement that work on HS2 Euston has been deferred due to “inflationary pressures”. Indeed, the latest cost estimate for the 10-platform design at Euston now totals 4.8 billion GBP, which is 2.2 billion GBP over the originally allocated budget and also 0.4 billion GBP more than the initial 11-platform design cost estimate.

HS2 to develop stations of the future
The exterior concept design at HS2 Euston Station

Since 2020, the DfT and HS2 Ltd have attempted to reset the HS2 Euston programme due to its delivery being more complex and expensive than anticipated.

In April 2020, HS2 Ltd set a budget of 2.6 billion GBP to construct an 11-platform HS2 Euston station, but by June 2020, this plan was estimated to cost 4.4 billion GBP.

Consequently, in November 2020, DfT directed HS2 Ltd to pause construction on the 11-platform design and to instead begin work on a 10-platform plan. However, these new plans are now 0.4 billion GBP more expensive than the previous 11-platform design.

Furthermore, in Autumn 2021, the DfT instructed HS2 Ltd to integrate more closely with Network Rail’s redevelopment of the existing rail station, which led to much of the previous design work being scrapped, at a cost of 106 million GBP.

The report consequently concludes that these attempts to reset the programme have not been successful and further action is now required to develop a viable plan.

The NAO advises that the recently announced pause in construction should therefore be used to re-evaluate the project and ensure an affordable design.

However, it also warns that the deferral of spending will now likely lead to additional costs and higher overall spending due to the costs associated with stopping and re-starting work, contractual changes and managing the project for longer.

Gareth Davies, the Head of the NAO, said:

“Government is once again having to revise plans for Euston HS2. Clearly, the 2020 reset of the station design has not succeeded. DfT and HS2 Ltd have not been able to develop an affordable scope that is integrated with other activity at Euston, despite their focus on costs and governance since 2020. Recent high inflation has added to the challenge.

“The March 2023 announcement by the Transport Secretary pausing new construction work should now give DfT and HS2 Ltd the necessary time to put the HS2 Euston project on a more realistic and stable footing. However, the deferral of spending to manage inflationary pressures will lead to additional costs and potentially a more expensive project overall, and that will need to be managed closely.”

The NAO’s report advises that the DfT should work with the Euston Partnership, HS2 Ltd, Network Rail, Lendlease and local partners to reassess the HS2 Euston project and its budget.

The National Audit Office said that when the budget for Euston was originally fixed in 2020, it was fixed too early and too low, and it was imperative to avoid repeating these mistakes.

The report thus also suggests applying these lessons learned to HS2 Manchester stations and other aspects of the programme.

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