Extra design work digs £200m deeper into HS2 contingency

Aaron Morby 1 year ago

The cost of extra design work on the HS2 main work contracts has eaten £200m into contingency funding for the project in the last six months.

Already HS2 is supporting nearly 30,000 construction jobs as it approaches peak construction next year
Already HS2 is supporting nearly 30,000 construction jobs as it approaches peak construction next year

The latest progress report on the mega project reveals that HS2 has had to dig deeper into its £5bn contingency funds.

Significant amounts of the original design work on HS2’s Euston station have been ditched after the decision was taken for the station to be scaled back from 11 to 10 platforms.

HS2 chiefs are now projecting around £1.9bn of net additional cost pressures on phase 1, an increase of about £200m since March and £700m more than a year ago.

So far the mega project has drawn £1.5bn or 28% of its £5.6bn contingency for phase 1, leaving about £4bn in the pot to complete phase one of the project within the 2029 to 2033 time frame.

The latest project spend figures are based on 2019 prices and do not take into account industry-wide construction materials inflation which hit 18% according to official Government figures in the year to August.

HS2 is now ramping up to hit peak construction next year and is now supporting 29,000 construction jobs, with nearly 2,600 firms to date working on the project.

Transport secretary Mark Harper in a six-month HS2 monitoring report to Parliament said:  “While inflation is not affecting the overall affordability of HS2 in real terms because the total budgets and cost estimates for each phase are set in 2019 prices, it is creating pressures against its existing annual funding settlements, which have been set in cash.

“I am clear that HS2 Ltd and its supply chain must do all that they can to mitigate inflationary pressures.”

He said that HS2 was tasked in September to develop and implement actions to bring projected costs back in line with the target cost.

It has since identified an estimated £800m of net savings and efficiencies within phase 1.

These principally consist of savings across the main works civils portfolio and savings in the acquisition and resale of land and property.

These have partly offset gross cost pressures resulting in the latest published net figure.

Harper reported that HS2 phase 1 was still on track to be delivered within its maximum targeted cost including contingency of £45bn.

The phase 2a budget remains unchanged, with a cost range of £5.2bn to £7.2bn.

Government intends to set a target cost alongside the publication of the full business case shortly.

On phase 2b Western Leg, the overall cost range has fallen by around £3bn after removing the Golborne Link.


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