Transport secretary Mark Harper said the £7bn Birmingham to Crewe leg of HS2 and the £7bn flagship Lower Thames Crossing would be delayed to allow funds to be focused on delivering the existing capital programme.

He said: “Refocusing our efforts will allow us to double down on delivering the rest of our capital programme. This will place our transport investments on a sustainable footing and allow us to support the government’s priorities of halving inflation, growing the economy and reducing debt.”

The announcement casts into doubt progress on phase 2b from Crewe to Manchester, which looks likely to suffer a knock-on delay.

Harper said over £800m had already been spent on planning the massive Lower Thames Crossing tunnel scheme.

He said: “It is one of the largest planning applications ever, and it is important we get this right.

“We remain committed to the Lower Thames Crossing, and the development consent order process will be an important opportunity to consult further to ensure there is an effective and deliverable plan. In order to allow time for this process, and given wider pressures on RIS, we will look to rephase construction by two years.”

He also announced that the £320m A27 Arundel bypass in Sussex and £250m A5036 Princess Way in Liverpool were facing a range of challenges including environmental considerations and ongoing scope and design changes.

To provide more time, both these schemes will be deferred to RIS 3 (covering 2025-2030).

Harper said that other schemes earmarked for RIS 3 would continue to be developed, in line with the statutory process, but for consideration for inclusion during RIS 4 (beyond 2030).

“Given many of these schemes were previously expected towards the end of RIS 3, this extra time will help ensure better planned and efficient schemes can be deployed more effectively,” he said.

The big decision to delay progress on HS2 Birmingham to Crewe looks set to have an immediate impact on Kier and Balfour Beatty.

Kier has been mobilised to deliver a £50m highways and utility enabling works contract for this stage while Balfour Beatty is also working on its £52m advanced environmental works package.

Also bidders hanging on tenterhooks since September for news of the award of the £500m design and delivery partner role to oversee construction of phase 2a are likely to face an even longer wait to find out if they have succeeded.

Teams in the chase include: 2 Connect JV (AECOM /Costain Integrated Services);  AMS JV (Atkins /Mace Consult / SYSTRA); and Jacobs UK.

While a project delay is unlikely to save cash over the full course of the project, it will allow Government to spread the cost over a longer period of time, making it more affordable by reducing annual expenditure.

Stephen Marcos Jones, CEO of the Association for Consultancy and Engineering (ACE),  said: “I think every sensible person knows that global events have driven inflationary pressures to record highs.

“But we have already spent significant sums on the design and delivery of this transformational major project.

“Scaling back ambitions at this stage will mean the economic and social benefits of HS2 for communities across the UK is further watered down – and major delays like this are actually going to cost more in the longer term.

“In a nutshell, the delays announced today are, quite simply, an absolutely false economy.”