The new estimate provided by HS2 chief Sir Jon Thompson is nearly double what the entire project was expected to cost in 2013.
Then the whole project, including the planned phase two routes to both Manchester and Leeds, had an original price tag of £37.5bn.
Giving evidence to the Transport Select Committee, Sir Jon confirmed that HS2 Ltd’s latest estimate for the London to Birmingham stretch is between £49bn and £56.6bn in 2019 prices.
This is at odds with the government’s present expectation, set out in its recent Network North plan, which said the truncated project would be delivered at £45bn.
He estimated after three years of industry-wide rampant cost inflation in steel and concrete in particular around £8bn-£10bn should be added to the estimate for an indication of the true cost at today’s prices.
Sir Jon also told the committee that he could not guarantee costs would not rise further while contractors were incentivised through cost-plus contracts to spend money.
He said that HS2 was currently trying to renegotiate terms with contractors and for the first time had put in place proper management control systems to keep tabs on individual contracts.
Sir Jon explained there were four chief reasons for the massive overrun.
“The first is that the cost estimate and budget set in the first place was too low, in my opinion.
“Second there has been some changes to scope. Thirdly there has definitely been some poor delivery and fourthly there has been cost inflation.”
He added that a ‘hostile project environment’ with Covid and local planning challenges had also contributed to problems but to a much lesser extent.
Covid cost up to £600m extra, slow planning also hit the project, with one local consent taking over two years to then be turned down.
“And then lastly Government itself said ‘we can’t really afford to fund the schedule; we will need you to go slower because we can’t afford it in cash flow terms’.”
“Obviously if you wait to do something in three year’s time, it is going to cost more than now,” he explained.
