HS2

PwC report suggests HS2 will provide healthy return on investment

A new economic analysis of the London-Birmingham phase of the HS2 project suggests it could produce between £6bn to £7bn as a return on the £13.9bn investment.

PwC, which did the analysis for pro-HS2 think tank Greengauge 21, released the figures just days before the consultation on HS2 is due to close on July 29.

Transport Secretary Philip Hammond recently confirmed that he expected the infrastructure to be sold off as a concession, as happened with HS1, to recoup the high build costs.

Richard Abadie, PwC partner and global head of infrastructure finance, said: “HS2 will represent a significant investment in the UK’s national infrastructure. Given the pressure on Government finances it is important to minimise the financial impact of this investment through asset sales. Our report says the Government may be able to sell the infrastructure for between £6-7bn, representing up to 50% of the initial design and construction costs. This will be a key consideration in the continuing affordability debate, not only for HS2, but for the wider high speed network.

Jim Steer, director of Greengauge 21, said: “This new analysis by PwC demonstrates that HS2 is an investment that not only helps the wider economy, but also makes a healthy £6-7bn payback to the Exchequer three years after opening. This is a very good up-front return on the £13.9bn construction cost. HS2 is unusual in that it is a transport project that generates very large cash receipts as well as other transport and regeneration benefits that will improve the productivity of the economy, right across the regions, and especially in the Midlands and the North.

“And there are potentially further cash returns over the lifetime of the project. The Exchequer will receive, over time, estimated extra tax receipts on the profits earned by the infrastructure concession holder and rail operating franchises worth £1.5-2bn and, at the end of the initial concession period, HS2 could be sold again, generating a further £1-2bn return to the taxpayer.”

The current timeline for HS2 is for it to open in 2026 with a potential sale once built.

It will allow speeds in excess of 200mph and an estimated journey time of 49 minutes between London and Birmingham, with peak service frequencies in 2026 of 11 trains per hour.

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