Progress reports on the HS2 show that the project has had to dig even deeper into its £5bn contingency funds.
The report revealed that the original design which work showed HS2’s Euston station having 11 platforms, has now had to be scaled to 10 platforms.
Bosses of HS2 are predicting around £1.9bn of net additional cost pressures on phase 1 alone, which equates to an increase of £200m since March and £700m around 12 months ago.
Operating costs of this phase 1 project now means that over £1.5bn has been drawn down from its £5.6bn contingency plan. Phase 1 of the project is due to be completed within 2029 to 2033 with only £4bn remaining in the pot
Indeed, the projected spend figures are actually only based on 2019 prices which as we know will not take into account the inflation levels of 18% for construction materials.
Currently HS2 is supporting 29,000 constructions jobs and 2,600 firms, as the project ramps up to hit peak construction in 2023.
HS2 Minister Mark Harper in his latest six-month report to Parliament said: “While inflation is not affecting the overall affordability of HS2 in real terms because the total budgets and cost estimates for each phase are set in 2019 prices, it is creating pressures against its existing annual funding settlements, which have been set in cash.
“I am clear that HS2 Ltd and its supply chain must do all that they can to mitigate inflationary pressures.”
He said that HS2 was tasked in September to develop and implement actions to bring projected costs back in line with the target cost.
It has since identified an estimated £800m of net savings and efficiencies within phase 1.
These principally consist of savings across the main works civils portfolio and savings in the acquisition and resale of land and property.
These have partly offset gross cost pressures resulting in the latest published net figure.
Harper reported that HS2 phase 1 was still on track to be delivered within its maximum targeted cost including contingency of £45bn.
The phase 2a budget remains unchanged, with a cost range of £5.2bn to £7.2bn.
Government intends to set a target cost alongside publication of the full business case shortly.
On phase 2b Western Leg, the overall cost range has fallen by around £3bn after removing the Golborne Link.
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