HS2 reveals £2bn in costs linked to Sunak’s downgrade of line

HS2 has revealed more than £2bn in costs linked to Rishi Sunak’s decision to downgrade the high-speed rail line.

The UK’s largest infrastructure project revealed that it had written off £1.1bn in costs incurred during “phase two”, which was due to link Birmingham to Manchester until the government scrapped it last year.

In its annual report , HS2 Ltd also disclosed a further £1bn in accounting charges relating to the project’s reduced ambitions, which will lower its expected future income.

In total, the business announced £2.17bn in one-off costs associated with cutting back the railway.

Sunak axed the second leg of the HS2 project and scaled back plans for London Euston station in October last year, during the Conservative party conference in Manchester.

Confirmation of the plan provoked dismay in a city that was due to benefit from the new rapid link, with the timing widely seen as a political gaffe.

Related: West coast fares could rise to incentivise people ‘to not travel by rail’, UK watchdog says

It was a decision that followed a series of long delays and rises in estimated costs that had caused the high-speed line’s predicted price tag to balloon to £71bn.

The government said it would save £36bn by scrapping part of the line, and Sunak pledged to reinvest in other rail projects including Network North, improving links between northern cities.

Originally planned as a Y-shaped line linking London with Manchester and Yorkshire, HS2 has been progressively cut back and downgraded. Boris Johnson’s government cancelled plans for HS2 to reach Leeds in November 2021.

While the decision to terminate HS2 in Birmingham has met with anger in regions that were poised to benefit, Labour has said it would not reverse the previous government’s decision, after Keir Starmer said in January that it was “not possible”.

The government’s spending watchdog recently said that the decision to axe HS2’s second leg is likely to mean fares will need to rise on the west coast mainline from London to Manchester in order to put people off travelling by train. While HS2 was meant to relieve capacity on the line, the National Audit Office said there could be 17% fewer seats on trains between Birmingham and Manchester than at present because of the decision to stop the line in the Midlands.

It said the Department for Transport would need to assess options to manage demand by “incentivising people to travel at different times or to not travel by rail”.

Referring to Sunak’s cancellation of phase two, HS2 said: “This change in policy has resulted in a constructive loss to the company of £2,171.4m in 2023-24.”

The company attributed £850m of asset writedowns to the cancellation of the Birmingham to Manchester route, meaning that the “company “is no longer expected to gain an economic benefit from the preparatory work required to build these phases”.

The figure does not include the cost of purchasing land and property, which the company hopes to be able to sell on at a later date.

It also took a further hit of £152.9m linked to work required to complete what was meant to be a 10-platform station at London Euston, next to the existing mainline terminus.

The redesigned station will now be just six platforms, reducing its value as an asset. The previous government said private funding would be required to ensure trains go to the central London station at all.

If not enough money is found, HS2 will permanently stop at Old Oak Common in the capital’s western suburbs.

The company also reported a loss of £1.07bn as it wrote off costs incurred on the cancelled phase two leg, including design, preparation of legislation, “enabling works” and environmental projects.

A further £95m of costs will arise from costs linked to winding down the project, such as “remediation” and ensuring that work can be stopped safely.

In theory, some of the taxpayers’ costs could be recouped by diverting funds to other areas of the rail network, or if a future private or public body sought to resurrect the Birmingham to Manchester line or the original, larger, plan for Euston station.

The annual report also revealed that HS2’s former chief executive, Mark Thurston, was paid £652,569 for his final year, including a £34,345 bonus. Thurston announced his resignation in 2023 after six years.

At the time his departure was announced, HS2 was still expected to run to Crewe and Manchester.

A spokesperson for HS2 said: “We are required to declare spending on the project that HS2 Ltd is no longer expected to gain any economic benefit from.

“In this case, losses relate entirely to work delivered on the northern phase of HS2, which was cancelled by the previous government, and the former design of the high-speed station at Euston.”

The shadow transport minister, Helen Whately, said: “Cancelling the second leg of HS2 was a difficult decision, but it was the right one. The £36bn saved will make more of a difference as road and rail improvements for communities up and down the country.

“Or at least would have done, because Labour have now thrown the entire transport pipeline into chaos. Vital transport upgrades look like they’ll be collateral in their mission to trash our legacy.”

The Department for Transport has been approached for comment.