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HS2 could bridge north-south divide, report claims

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Latest analysis from consultancy KPMG suggests HS2 could offer an annual £15 billion boost to the economy

The saga over HS2 has taken a new twist following claims by KPMG the controversial high speed line could boost the regions and offer £15 billion per year to the economy.

It suggests the north and midlands would gain at least double the benefit of the south.

The estimated annual economic gains for the regions from 2037 onwards included £2.5 to £2.8 billion in Greater London and £1.5 to £3.1 billion in the West Midlands. A further £5 to £7 billion annual economic gain is predicted for UK regions that are not on the new line.

The table below from the report shows the estimated changes in economic output by city region in 2037 after investment in HS2.

 GDP impact per year
Region‘Low’ business location scenario‘High’ business location scenario
Greater Manchester£1.3 billion£0.6billion
West Yorkshire£1.0 billion£1.0 billion
South Yorkshire£0.5billion£0.9 billion
Derby-Nottingham£1.1 billion£2.2 billion
West Midlands metropolitan area£1.5billion£3.1 billion
Greater London£2.8 billion£2.5billion
Rest of Great Britain£7.0 billion£5.0 billion
Total impact for GB economy£15billion£15billion

The report – which was commissioned by high speed rail link-backer HS2 – has been supported by transport secretary Patrick McLoughlin, who claims the project will be a ‘heart bypass for the clogged arteries of our transport system’.

Richard Threlfall, KPMG’s head for infrastructure, building and construction said: ‘There have been repeated calls for a business case for the HS2 scheme focused on jobs, productivity and growth. KPMG’s analysis forms a key part of that business case, setting out the economic impact across the country of the HS2 scheme.

‘It shows beyond reasonable doubt that HS2 brings net benefits to the country of many times the scheme’s cost. It shows the UK will be £15 billion a year better off with HS2, recovering the cost of the scheme within just a few years.

‘Our analysis also shows that HS2 will significantly help counter the corrosive effects on our country of the widening north-south divide. There has been a long-running debate about “who wins” from HS2, the north or the south? The answer is both.’

Lewis Atter, KPMG lead on infrastructure strategy said: ‘Adding £15 billion a year to the UK economy is like creating an economy the size of Cambridgeshire or Oxfordshire, without reducing the size of anywhere else.

‘Given the proportion of GDP that flows to the Exchequer, this means more than £5 billion a year in extra tax receipts, more than enough to cover the long term costs of the project to the taxpayer.

Managing director of consultancy WSP Mark Naysmith said: ‘The HS2 doomsayers have been heavy with their criticisms of the cost but have conveniently forgotten to look at the return on that investment. HS2 is not simply a rail project, the development opportunities around new stations alone will be a major catalyst for regional growth.

‘Furthermore, no one has yet to come up with a realistic alternative that can serve the same purpose. Ploughing the money into existing lines just isn’t justifiable and doing nothing is clearly not an option if we want to remain competitive and progressive.’

Backing the report, the Institution of Civil Engineers (ICE) has called upon the government to better communicate the benefits of HS2. The director Nick Baystock said: ‘ICE believes HS2 remains the best option for greatly increasing rail capacity in the medium-long term, strengthening connectivity between city-regions and creating economic and regeneration opportunities. The project carries a stronger operational and business case as a full ‘Y’ shaped network - which improves further still with the planned connections to Glasgow and Edinburgh - and should be viewed on this basis.

‘As well as continuing to develop the business case, government must better communicate that HS2 is a complement, not an alternative, to other transport investment and position it as an integral part of a national transport strategy, rather than a project developed in isolation. It must also take a strong lead in expelling the misunderstandings around risk management and contingency budgets which have caused concern around projected costs.’

The report comes after the Public Accounts Committee slammed the government for failing to put forward a ‘convincing’ case for HS2.

MPs claimed the decisions on the £42.6 billion project had been made on ‘fragile numbers, out-of-date data and assumptions’.


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