I am proud to report significant progress on High Speed 2 (HS2) in my third update to Parliament on the project. We remain within budget and schedule, have hit major construction milestones, made substantial progress with key procurements, and are crucially supporting more jobs than ever before – all demonstrating just how HS2 is central to this government’s mission to Build Back Better from the COVID-19 pandemic.
Key achievements in this reporting period (February to August 2021 inclusive) are:
- the recent announcement that the project now supports 20,000 jobs, just over a year since the Prime Minister marked the start of main construction. To date, over 2,200 businesses, 97% of which are UK-registered, have delivered work on HS2
- launching the first tunnel boring machines (TBMs) that are digging the 10-mile-long tunnels underneath the Chilterns hills. The 2 TBMs have driven a combined distance of approximately 1.5 miles and are progressing ahead of schedule. Construction on the new ‘superhub’ HS2 station at Old Oak Common (supporting 2,300 jobs and 250 apprenticeships) has also started
- at Euston, we’ve confirmed the move to a less complex, more efficient 10-platform design, which can be built in a single-stage, and can still support the full operation of the HS2 network
- releasing tenders for Phase One and 2a rail systems packages, with 14 rail systems packages available over the next 2 years (which include systems for track, power, signalling and communications)
- on Phase 2a, commencing early environmental works which marked the first stage in extending the railway from the West Midlands to Crewe and starting procurement for a design and delivery partner (DDP)
- announcing the government’s commitment to deliver a ‘net gain’ in biodiversity for the next phase of HS2 (Crewe to Manchester)
The report uses data provided by HS2 Ltd to the HS2 Ministerial Task Force for Phases One and 2a and covers the period between February 2021 and August 2021 inclusive. Recommendations from the Public Accounts Committee (PAC) report of 22 September 2021 have been considered and I will provide an update on the continued implementation of these recommendations in my next report.
In my last report, I confirmed that Phase One remained within its projected delivery into service (DiS) range of 2029 to 2033. I also committed to providing an update on the outcome of a schedule re-planning exercise to mitigate the impact of delays that have arisen since the schedule was set at the start of last year (of which some are COVID-19 related).
This exercise was undertaken by HS2 Ltd and its suppliers and the exercise has now concluded. Construction activities have been successfully re-sequenced to deliver a schedule that reflects an increasingly mature understanding of the years of works ahead. The re-sequencing helps resolve a large number of previously reported schedule pressures, whilst still retaining the Phase One DiS range of 2029 to 2033. The cost of these mitigations has been assessed at £110 million and will be covered by contingency delegated to HS2 Ltd.
Whilst the forecast DiS range for Phase One remains 2029 to 2033, HS2 Ltd has identified some potential minor delays in the southern section of the line-of-route and tunnels leading into Old Oak Common from outer London. Our focus now is to identify efficiencies and control risk in these key areas. The most notable risks include:
- residual delays in completing enabling works and handover to main works in certain locations
- slower than planned design progress and securing planning consents by the main works civils contractors that are limiting productivity of the supply chain
- the consequential impacts of COVID-19, which has continued to cause disruption within this reporting period
Following Royal Assent of the Phase 2a High Speed Rail Bill, the Phase 2a DiS range has now been set to 2030 to 2034. New delivery arrangements have been approved, including a DDP that will act as a strategic partner for HS2 Ltd to provide support in managing design and construction.
HS2 remains within budget. The overall budget for Phase One, including Euston, remains £44.6 billion. This is composed of the target cost of £40.3 billion and additional government-retained contingency of £4.3 billion. The target cost includes contingency delegated to HS2 Ltd of £5.6 billion for managing risk and uncertainties.
On Phase 2a, revised delivery arrangements were approved in June 2021 based on an updated cost range of £5.2 billion to £7.2 billion, broadly similar to the National Audit Office’s (NAO’s) report of January 2020. Arrangements will be formalised in the Spending Review.
To date, out of the Phase One target cost of £40.3 billion, £12.9 billion has been spent, with an additional £1 billion for land and property provisions. £12.4 billion has additionally been contracted, with the remaining amount not yet under contract or drawn as contingency.
Since my last report, the first £15 million of the £4.3 billion of government-retained contingency for Phase One has been allocated, to increase the number of trains that Old Oak Common station can serve from 3 to 6 trains per hour whilst it acts as the temporary London terminus. This will unlock substantial economic benefits until the completion of the new HS2 station at Euston.
To date, HS2 Ltd has drawn about £0.8 billion of its £5.6 billion delegated contingency. Contingency use to date reflects an increase of about £0.4 billion since my last report to Parliament. The rate of contingency draw is expected at this stage given the nature of current enabling and civil works and the scale and complexity of the programme.
HS2 Ltd is currently reporting future potential cost pressures of around £1.3 billion (compared with my previous update of £0.8 billion). If these cost pressures materialise, they will be drawn from contingency held by HS2 Ltd, of which £4.8 billion remains. Of the £1.3 billion potential contingency drawdown, the key cost pressures currently being reported which may require a call on contingency delegated to HS2 Ltd if not mitigated are:
- an estimate of £0.6 billion for the slower than expected mobilisation of main works civils contractors for Phase One, associated with delays to enabling works handovers, design approvals and securing of planning consents. This estimate is, in part, informed by the schedule re-planning exercise
- a £0.4 billion pressure on Euston cost estimates (which remains unchanged from my last update to Parliament). However, now that the move to a smaller, less complex 10-platform single-stage delivery strategy at Euston has been confirmed (which will still support the full operation of the HS2 network), the Department for Transport (DfT) anticipates that cost pressures at Euston will be reduced as the updated station design is developed over the coming months
- a further £0.15 billion pressure has been reported for delivering on-network works on the existing Euston network that are required to facilitate the new HS2 station
HS2 Ltd has identified over £0.3 billion in savings and continues to focus on realising further efficiencies and opportunities to reduce the cost of Phase One.
On COVID-19 costs (which will be managed from within government-retained contingency), HS2 Ltd is making good progress with its suppliers to quantify the impacts on individual contracts ahead of submitting claims to request drawdown of government-retained contingency. Since my last report, HS2 Ltd has updated its assessment of the likely financial impact of the pandemic on delivering Phase One and estimates the full costs within the range of £0.4 billion to £0.7 billion (this has been authorised by DfT). The assessment was based on the extended duration of restricted working practices anticipated to run to a revised end-point assumption of December 2021.
DfT and HS2 Ltd have agreed in principle a set of initial claims that include direct and measurable costs of restrictions that relate to the initial phases of COVID-19 in 2020. These will now be subject to government scrutiny and will require formal approval before funds from government-retained contingency can be allocated.
On Phase One, work is well underway at our 340 sites between London and the West Midlands and construction of the line-of-route continues to gather pace. Health and safety remains a top priority for the project as work continues to ramp up. With over 4 million hours worked across the programme per month, there has been an increase in the number of safety-related incidents. HS2 Ltd is focused on continual improvement with its supply chain including through embedding lessons learned and cross-functional learning between integrated project teams comprising of HS2 Ltd staff and its contractors.
The launch of the first 2 TBMs (Florence and Cecilia) marked a significant moment for the project. The TBMs are the largest ever used on a UK rail project and will excavate tunnels underneath the Chilterns for the next 3 years. Further TBM launches are planned in the coming months, including excavation under Long Itchington Wood.
Elsewhere, good progress has been made on the 4 new HS2 stations along Phase One. In June 2021, the Transport Secretary visited Old Oak Common to mark the start of permanent construction. This ‘super-hub’ station truly shows the government’s Plan for jobs in action – kickstarting major regeneration, supporting 2,300 jobs and 250 apprenticeships in construction.
In the West Midlands, a design and build contract for Birmingham Curzon Street station was awarded to HS2 Ltd’s new construction partner on time. HS2 Ltd has also recently announced the shortlist of bidders for the contract to build the award-winning Interchange Station in Solihull, and contract award is planned for summer 2022.
In response to a recommendation from the Oakervee Review about looking into the efficiency of the Euston station, the move to a smaller, simpler 10-platform station design at Euston has now been confirmed, which can be built in a single-stage (instead of an 11-platform, 2-stage build). This will provide a more efficient design and delivery strategy and play a significant role in mitigating the affordability pressures recently identified. Moving to this revised HS2 Euston station design maintains the station infrastructure capacity to run 17 trains per hour, as set out in the Phase One full business case. We are continuing to explore opportunities for greater integration between the HS2 and Network Rail stations through The Euston Partnership and to optimise the oversite development above the Euston terminus.