HS2 enabling works are already running £800m over budget, with the effects of Covid potentially set to hit budget pressure even further, a written statement to parliament has revealed.
£400m of the extra spending has been attributed to problems with the enabling works to prepare the line of route for construction. These have been underway since 2017 and in some areas “have encountered more significant challenges than anticipated,” say ministers.
Another £400m budget overrun is at Euston Station, where further development of the baseline scheme has identified a “significant cost pressure” – and ministers say that “further work is ongoing to validate these initial estimates and this could identify further pressure.”
HS2 minister Andrew Stephenson unveiled the figures in a six-month progress report to MP’s, which outlined that just over a month after construction formally started on phase one of HSE, a quarter of the money has already been spent.
Earlier this year, the government reset the funding regime for HS2, including a target cost and funding envelope for phase one and revised estimates for the wider scheme. The total funding envelope for phase one was set at £44.6bn (2019 prices) and the estimated cost for completing the full network was revised to a range of £72bn to 98bn.
For phase one, including Euston, HS2 Ltd projects an outturn cost at £40.3bn (2019 prices) which is at the level of its target cost.
Of the £40.3bn, £9.6bn has been spent to date, a further £11.5bn is contracted, and £13.9bn is yet to be contracted and remains an HS2 Ltd estimate. The target cost also includes available HS2 Ltd delegated contingency of £5.3bn for managing the risk and uncertainty that are an inherent part of delivering major projects.
HS2 minister Andrew Stephenson said: “HS2 Ltd is currently reporting cost pressures of £0.8bn. If not successfully remediated, these pressures will be drawn against the company’s delegated contingency.”
The minister said “getting a stronger grip on delivery to time and budget by establishing the Ministerial Task Force for Phases One and 2a” was one of the achievments of the last six months, and said any future Covid impact on the £40.3bn target would be cushioned by the contingency fund of £5.3bn.
Stephenson said: “This projection remains uncertain at this early stage in the project’s lifecycle (as with all major infrastructure projects) and does not yet reflect the impact of Covid. HS2 Ltd is expected to provide its estimate of the Covid impact within the next six months. Any cost changes will be contained within the funding envelope using the contingency already assigned.
“The overall response to Covid by HS2 Ltd and its construction partners has been positive with the rapid implementation of safe working practices to protect the public and workers and the re-opening of the majority of sites after a safety review. However, some works have been delayed and at some sites Covid-safe practices have necessarily reduced productivity to a limited degree.”