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High-speed rail plan could add 15 billion pounds a year to economy
September 11, 2013 / 11:28 AM / 4 years ago

High-speed rail plan could add 15 billion pounds a year to economy

LONDON (Reuters) - Britain's economy could get a boost worth 15 billion pounds per year from a new high speed rail network, a government-commissioned report showed on Wednesday, citing improved business productivity in the Midlands and the north of England.

High Speed Two (HS2), the government's 42.6 billion pound flagship infrastructure project, has been criticised by business groups and lawmakers who question whether it will generate sufficient benefits to outweigh its rising cost.

But the report, by consultants KPMG, said faster connections and higher capacity between London and cities like Manchester and Leeds would help businesses in the surrounding regions become more competitive and drive increases in productivity worth 13 billion pounds per year.

Better transport links for workers would also create a more flexible labour market and generate economic benefits, said the report, which used a different methodology from previous government analyses.

"(The report) 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," said Richard Threlfall, Head for Infrastructure, Building and Construction at KPMG.

British Transport Secretary Patrick McLoughlin is due to make a speech later on Wednesday welcoming the report's findings and arguing that the project, due for completion in 2033, is the right way to spearhead the country's infrastructure investment programme.

"The big choices we make about infrastructure today have a big effect on economic output tomorrow," he will say. "The main reason we need HS2 is as a heart bypass for the clogged arteries of our transport system."

The proposed route cuts through swathes of the British countryside and has sparked protests from local communities, while senior lawmakers in the opposition Labour party have said the plan has become too expensive and could divert money needed to maintain existing lines.

Responding to criticism over the cost of the project, which went up by almost 10 billion pounds earlier this year, McLoughlin said his department was enlisting external project management experts to help reduce the contingency budget, which accounts for 14.4 billion pounds of the stated cost.

The British Chambers of Commerce on Wednesday published an open letter to Prime Minister David Cameron urging him to press ahead with the project as long as costs can be controlled.

Right-wing think tank the Institute of Economic Affairs, which has vocally opposed HS2, criticised the change in methodology behind the KPMG report, calling it "one-sided and unconvincing".

Editing by Hugh Lawson

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