HS2 costs could rise to £106bn or more, warns government review

The political battle over HS2 has intensified following the leak of a government review that found the costs of the high-speed rail link could reach £106bn, leaving supporters in the north fearing the government may scale back or axe the project.

The draft report said there is a “considerable risk” that costs could rise by another 20% from the last estimate in September, which priced the scheme at £81bn-£88bn. The original budget was £34bn.

The review, which was leaked to the Financial Times, also called for work on the second phase of the link – from the West Midlands to Manchester and Leeds – to be put on hold for six months to explore whether it could be made up of a mix of standard and high-speed rail.

Suggestions that the second phase of HS2 could be scaled back once the first leg from London to Birmingham is completed prompted dismay in the north, as well as from business, rail and construction industry leaders, who said scrapping the scheme would be devastating for jobs and future infrastructure plans.

The mayor of Greater Manchester, Andy Burnham, said it was the “same old story. London to Birmingham, money is no object, and then all the penny-pinching is done in the north of England. That would not be acceptable to me, and I’m sure wouldn’t be acceptable to many other leaders across the north.”

Judith Blake, the leader of Leeds city council, said it was time to end damaging speculation around HS2 by immediately publishing the review by the former HS2 chair Doug Oakervee, followed by “an unambiguous government commitment to deliver the project in full”. She said: “Anything less, including downgrading HS2 north of Birmingham, would seriously damage this government’s claim to be levelling up the north and Midlands.”

The Oakervee review is set to recommend that ministers push ahead with HS2. But it says further work is needed to assess what economic benefits or impact on growth the project will have in the regions.

The first leg, linking London to Birmingham, was due to open in 2026, but a separate review by the HS2 Ltd chair, Allan Cook, admitted that it could be delayed until 2031. The second phase to Leeds and Manchester was due to open in 2032-33, but may not be completed until 2040.

The transport secretary, Grant Shapps, said on Monday that the “massive decision” on whether to go ahead with HS2 “needs to be fact-based” and would be made shortly, after further input of data from civil servants in his department. Shapps said he had “a relatively neutral point of view”, adding: “We’ll be making a final decision, along with the prime minister and the chancellor, on this very shortly.”

One senior politician, who backs HS2, told the Guardian there was now a “huge political battle” going on behind the scenes and it was unclear whether previously supportive cabinet ministers would be willing to stand up for it with the threat of a reshuffle hanging over them.

Meanwhile, Tory opponents of HS2, led by Dame Cheryl Gillan and Victoria Prentis, are feeling emboldened since the Conservatives’ election victory. A delegation of about 20, including new northern and Midlands Tory MPs, will meet Boris Johnson on Wednesday to discuss their reasons for opposing the scheme. Two such MPs said they would want local services prioritised over HS2 if the government decides to choose between them.

Johnson has said he would think very carefully about abandoning such a major infrastructure project, but two key advisers – Dominic Cummings and Andrew Gilligan – have been arguing against its spiralling costs.

Rail industry leaders said there were no comparable alternatives and warned that delaying HS2 would have a devastating impact and set infrastructure plans back by a decade. The Railway Industry Association (RIA), which represents manufacturers, suppliers and construction firms in the sector, said up to 30,000 jobs would be put at risk by cancellation and warned that other infrastructure projects “like Northern Powerhouse Rail [NPR], require HS2 to be delivered to realise their full benefits”.

NPR’s director, Tim Wood, said the proposed £39bn east-west railway line from Liverpool to Hull would cost billions more without HS2. He said: “If HS2 did not happen, we would have to build a further 80km of infrastructure, plus associated station work, at a cost of many billions of pounds.”

NPR uses substantial sections of HS2 track, including a tunnel from Manchester Airport to Manchester Piccadilly.

Business leaders called for HS2 to be built without delay. The bosses of Britain’s biggest construction and engineering firms, along with the CBI, warned that cancellation would cause “irreparable damage”. In a letter to the PM they warned that there were “no alternative, shovel-ready projects” and that he risked seeing the industry’s “skills and capabilities … die”.

The British Chambers of Commerce, which represents 75,000 businesses, said: “While there can be no blank cheque, cutting the project back would put development and investment plans across the country at risk.”

Anti-HS2 campaigners said the government should stop all works immediately in light of the report. Penny Gaines, the chair of Stop HS2, said: “There are massive problems with and within HS2 Ltd and even the Oakervee review, led by a former chair of HS2 Ltd, can’t brush them all under the carpet. Rather than tinkering with the proposals, the government should pull the plug on the scheme and cancel HS2 in its entirety immediately.”

But a member of the Oakervee review panel, the economist Andrew Sentance, said the report had been mainly positive and was being spun by opponents. He tweeted that it was “a total shambles that this HS2 review has not yet been published … When ministers describe the review report as a ‘draft’, they are misleading the public.”

The National Audit Office is expected to publish its own report on HS2 by the end of January.