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Report suggests big ROI for UK government on High Speed 2

PwC has produced the first analysis of what the government could expect to see as a financial return if it sells the infrastructure of High Speed 2 (HS2).

According to a statement, figures show it could produce between £6bn to £7bn as a return on its £13.9bn investment.

The report, written by PwC for Greengauge 21, a not-for-profit think-tank researching the economic impact of high-speed rail for Britain, has calculated the return if HS2, like HS1, has its infrastructure sold off under a 30-year concession.

Delivering a return on Government’s investment comes before the end of the public consultation on the project on 29 July and focuses on the costs and revenues associated with the planned 175km high-speed route between London and the West Midlands.

The current timeline for HS2 is for it to open in 2026 with a potential sale once built. Once up and running, it will allow speeds in excess of 200mph and an estimated journey time of just 49 minutes between London and Birmingham.

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  £6bn–£7bn, representing up to 50 per cent 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.

‘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 report is based on the planning assumptions developed by HS2, with a journey time from London to Birmingham of 49 minutes, anticipated peak train frequencies in 2026 of 11 trains per hour on the high-speed track from London to the West Midlands, and then onto Manchester, Liverpool, Preston and Glasgow. Fare prices are assumed to increase in line with the rest of the rail network.

In November 2010, the government completed the transfer of a 30-year concession of HS1 to a consortium for £2.1bn. The sale took place shortly after the completion of the 108km line that cost approximately £5.8bn to design and build.

Readers' comments (7)

  • This is good news but why does everyone in the media have so much trouble differentiating between the word sale and the word lease ? in your last paragraph you use the words "transfer" and "concession" and then you say "the sale took place" it isnt a sale !!!!! aaaaaaargh. rant over !

    It is important because many people will just read this story and see that it says that a project that costs £12 billion has been sold for £7 billion and conclude that it has made a loss ! particularly the antihs2's.

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  • There's no country in the world where high speed rail actually makes money. In France, only the Paris-Lyon line is in the black. In Japan, the bullet train network had to be bailed out because citizens only make one return journey on average every year. Taiwan's HSR system had to be bailed out two years after opening. And China's HSR network is in all sorts of problems, with one academic warning that the country faces a "high speed rail debt crisis, more serious than the subprime mortgage crisis." HS2 might be good for engineers - but not for the country or the tax payer.

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  • So, a brand new 200mph+ line that starts near Birmingham, runs near to Heathrow and ends up at Euston, 6 miles from the Central Business District in London and finally connects with the 186mph HS1 via a 30mph North London Line. Who designed this? Surely not an engineer please!!

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  • Robin Powell

    Your own words show how high speed rail ACTUALLY DOES pay back its costs - but only after waiting some 30-40 yrs.

    The lines you list are that old and have now paid back their costs. Most of the newer lines are on track to do the same - but some will take more time than others.

    Just when will the M1 or the M25 pay back their costs?

    HS1 is being RENTED out every 30yrs - so we should get more than the other half of the costs back when it gets rented out again (for more - and hopefully at a time of growth rather than the recession we just rented it out in) in 30 years time.

    HS2 will be about 4 times as busy and should thus earn a lot more.

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  • I wonder if it will be as financially rewarding to the user as the M6 Toll Northern Relief Road.

    Why do we need a 45 minute journey from somewhere near Birmingham to somewhere near London?
    My laptop won't even have powered up by then!

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  • Motorways have paid back their cost many times over directly to Government in fuel taxes and other Motoring/Transport taxes. Not hypothecated, therefore only a small proportion goes back into highway maintenance and new roads, and fixing cobbled together junctions.
    No railway has ever paid its way. Despite some being full, and expensive for passengers, they still demand a huge subsidy from the taxpayer.

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  • It is hardly surprising that Greengauge21 finds in favour of HS2 since it is a pressure group set up for that purpose. We should take a much more objective view and question the basic need to throw increased energy and public money at a project to enable the privileged few to travel faster. With the advent of ever better video conferencing facilities I cannot see an increased need for business travel in the future. Much of the economic benefit claimed for HS2 is in the supposed value of the saved time for highly-paid travellers. That assumes that the travel time is wasted. This is very far from true as most people are working productively on the existing trains. Improved mobile internet will only make this better and easier. I, for one, would not pay a premium to save a few minutes. High speed rail is a good solution in countries where the centres of population are far apart and where there is no existing intercity network. This is not so in Britain where our cities are relatively close together and much of our population lives between the cities. The only people to benefit from HS2 will be those who live near the end points. For the vast majority of people there will be no benefit. I fear this project will become an expensive white elephant, over priced and under used like the M6Toll.

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