National Audit Office Press Releases
High Speed Two: Euston
The government should use the two-year pause on new construction work at HS2 Euston to develop a design that is affordable, deliverable and value for money, according to a new National Audit Office1 report.
In March 2023, following an announcement by the Transport Secretary, the Department for Transport (DfT) deferred work on HS2 Euston and Phase 2a (Birmingham to Crewe) due to inflationary pressures. At Euston, HS2 Ltd also reported in March 2023 that the latest cost estimate for the 10-platform design is £4.8 billion, £2.2 billion more than its budget.
In January 2020 the NAO reported that the work at Euston was more complex than originally anticipated and that there was uncertainty over the HS2 station design.
The following month the Oakervee Review2 raised concerns about the design of the HS2 Euston station and concluded that the existing design was unsatisfactory.
In April 2020 HS2 Ltd set a budget of £2.6 billion for the HS2 Euston station, but by June 2020 it estimated that it could cost as much as £4.4 billion.
In November 2020, the DfT instructed HS2 Ltd to pause construction on the 11-platform design to begin work on a new 10-platform plan. These new plans are now £0.4 billion more expensive than the previous 11-platform design. In Autumn 2021 the Department also directed HS2 Ltd to integrate more closely with Network Rail’s redevelopment of the existing rail station and confirmed the extent of the surrounding commercial and residential developments. Much of the previous design work was then scrapped, at a cost of £106 million to the taxpayer, despite DfT’s efforts to minimise this.
To help with this integration, and in response to the Oakervee recommendations, in December 2021 the DfT formally established the Euston Partnership to bring together the different bodies involved with projects on the Euston site, including delivery of HS2 Euston station.3
Following the Transport Secretary’s announcement in March 2023, the DfT will now need to consider how best to control the budget while developing an affordable and deliverable design.
The two-year pause in new construction will see spending deferred in the short-term but lead to additional costs and potentially an overall increase in costs in the long-term. This is due to costs associated with stopping and re-starting work, contractual changes, and managing the project for longer.
By the end of December 2022 HS2 Ltd had spent more than £2 billion on the HS2 Euston station and its approaches, including design, land, and preparatory works.5 The land purchases and preparatory works cost £1.5 billion and were funded from the wider HS2 budget. Budget pressures on HS2 Euston station have now been compounded by significant inflationary pressures across DfT’s capital programme. In the first instance, HM Treasury (HMT) requires the DfT to absorb inflationary pressure, which has risen significantly since the forecast in 2020, within its existing cash budget.5
The NAO’s report recommends the DfT works with the Euston Partnership, HS2 Ltd, Network Rail, Lendlease6 and local partners to reassess the expectations for the HS2 Euston project, its budget, and the public benefits. It also suggests setting out clear aims and measures as part of the programme reset7 and applying the lessons it has learned to HS2 Manchester stations and other parts of the programme.
“Government is once again having to revise plans for Euston HS2. Clearly, the 2020 reset of the station design has not succeeded. DfT and HS2 Ltd have not been able to develop an affordable scope that is integrated with other activity at Euston, despite their focus on costs and governance since 2020. Recent high inflation has added to the challenge.
“The March 2023 announcement by the Transport Secretary pausing new construction work should now give DfT and HS2 Ltd the necessary time to put the HS2 Euston project on a more realistic and stable footing. However, the deferral of spending to manage inflationary pressures will lead to additional costs and potentially a more expensive project overall, and that will need to be managed closely.”
Gareth Davies, the head of the NAO
Read the full report
Notes for editors
- The fieldwork for this report was completed ahead of the decisions announced by DfT in March 2023 to defer work on Euston station and on HS2 Phase 2a (between Birmingham and Crewe) to manage wider inflationary cost pressures.
- The Oakervee Review was the government’s official review into the HS2 project. It was published in February 2020 and led by former HS2 chair Douglas Oakervee.
- The Euston Partnership is an unincorporated joint venture between the Department for Transport (DfT), HS2 Ltd and Network Rail that provides an advising and convening function to improve integration across the Programme. It is not a decision-making authority: DfT retains responsibility for decisions on funding; and the delivery bodies remain responsible for delivery and managing risk.
- The forecasting tool that HS2 Ltd uses as the basis of its annual cash budgeting with HM Treasury predicted in 2020 that there would be a cumulative fall in prices between December 2019 and August 2022 whereas revised forecasts made in 2022 estimated an inflation rate of around 18% in that period.
- As at the end of December 2022, HS2 Ltd has spent £0.5 billion (in cash terms) on the HS2 Euston station. It has also spent an additional £1.5 billion on land purchases and preparatory works for the station and its approaches that draws from the wider HS2 Phase One budget rather than the Euston budget.
- Lendlease is a private property development company responsible for the development around Euston station.
- The NAO sets out more information about programme resets in its March 2023 report: Lessons Learned: Resetting Major Programmes.
- Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.
Original article link: https://www.nao.org.uk/press-releases/high-speed-two-euston/
Latest News from
National Audit Office Press Releases
Support for innovation to deliver net zero19/05/2023 12:05:00
The UK Government has set out its research and innovation priorities in pursuit of net zero, but further action is needed to strengthen governance and delivery mechanisms if it is to secure value for money for its £4.2bn of innovation spending, a new National Audit Office (NAO) report says.
Improving resettlement support for prison leavers to reduce reoffending12/05/2023 15:20:00
The government is not consistently supporting prison leavers in resettling into the community and the quality of services has declined in recent years,1 a new report by the National Audit Office (NAO) has found.
Investigation into supported housing Press release10/05/2023 13:05:00
Gaps in data and regulation are – in some areas – allowing increasing numbers of landlords to profit by providing costly, sub-standard housing with little or no support, supervision or care, according to a new National Audit Office report.
Regulating to achieve environmental outcomes21/04/2023 15:25:00
Further progress towards ambitious 2018 goals for improving England’s natural environment are being put at risk by weaknesses in the Department for Environment, Food and Rural Affairs’ (Defra) oversight of regulation, a new National Audit Office (NAO) report says.
Tackling fraud and corruption against government30/03/2023 17:35:00
Most public bodies do not know how much fraud they face and cannot demonstrate that they have the correct level of counter fraud resources, according to the National Audit Office (NAO).
Investigation into Bulb Energy30/03/2023 16:35:00
There has been a substantial reduction in potential cost to the taxpayer of supporting the transfer of Bulb Energy (Bulb) to a new ringfenced supplier under the Octopus Energy Limited Group (Octopus), but risks remain, a new National Audit Office (NAO) report says.
COVID-19 business grant schemes23/03/2023 14:15:00
Government can build resilience against future national emergencies by applying lessons from its experience of paying £22.6bn in grants to businesses amid the COVID-19 pandemic, a new National Audit Office (NAO) report says.
Investigation into Child Trust Funds14/03/2023 14:15:00
Hundreds of millions of pounds in Child Trust Funds (CTFs) set up by the government between 2005 and 2011 to help young people financially at the start of their adult lives has not yet been claimed, according to the National Audit Office (NAO).