Short-term thinking on HS2 will cause long-term damage

The writer, an FT contributing editor, is chief executive of the Royal Society of Arts

Imagine you were connecting two cities, one rich, one poor, separated by a wide river. A transformational plan for a new bridge is forged to improve connectivity between them and stimulate growth. Evaluations suggest the long-run benefits far exceed the upfront costs. But high upfront costs, and distant long-run benefits, are hostages to short-term thinking. To save money, the decision is made to build only half a bridge, starting from the rich side of the river.

Not unreasonably, people soon question the value of this half-bridge. And, having started on the expensive side of the river, not only are upfront costs higher than planned but the benefits have disappeared entirely. A quarter of the way in, cost-benefit calculations are rerun. They suggest even completing the second quarter of the half-bridge is now uneconomic. That is duly canned and blushes are covered by using the cost savings to finance hundreds of small boats for use by those on the poorer side of the river.

This, alas, is no fairy tale. It is the grim story of the UK’s High Speed 2 rail project. Last week, Prime Minister Rishi Sunak announced this would be a quarter-bridge (London to Birmingham) rather than the half-bridge (London to Manchester) promised, with the savings reinvested in small local transport projects. This decision, and the many leading up to it, are a case study in how not to evaluate, design and deliver long-term, transformational growth projects.

It is easy to forget that HS2 began life as a full bridge. It was intended not only to connect the great cities of the North, including Manchester and Leeds, but Glasgow and Edinburgh in Scotland. Today, people talk animatedly about “15-minute cities”. At its inception, a completed HS2 would have made the UK a “90-minute nation”. Its major cities would have been connected in the time it takes to watch a football match, well ahead of many competitors.

The calculus of this expansive plan were clear and compelling, some pointing to £2.40 of benefits for every £1 spent. And even this was a potentially significant understatement. The Treasury’s project evaluation framework is designed for small projects yielding static, linear returns. For large, transformational investment projects where the network benefits are dynamic, the framework misses most of them.

International experience is salutary. Much is made of the rise of the global megacity. But it is mega-regions — connected agglomerations of megacities — that are the new frontier of growth. What started in the Tōkaidō region of Japan in the 1960s is now a global phenomenon. China has about 20 actual or emergent mega-regions, the US about a dozen. Each is part of a strategic economic development framework, underpinned by an inter-city connectivity plan. More than 25 countries have created or are building high-speed rail networks to unlock the economic potential of emergent mega-regions.

All, that is, except the UK. Instead, the full HS2 bridge has been thin-sliced into the world’s most expensive pier. With each curtailment, the network benefits have beaten a hasty retreat, and with them the prospects of the UK becoming a high-growth, high-connectivity mega-region. The country’s great cities will remain connected, but in the time it takes to watch a cricket Test match.

This outcome is all the more surprising because most analyses suggest the aggregative potential of the UK is very high given its twin endowments of large existing regional imbalances and small geographic footprint. The OECD ranks the UK, along with South Korea, as having the highest degree of potential mega-region centrality, as measured by access to population by distance and possible travel time. HS2 decisions mean the UK’s growth is unlikely to be travelling at high speed any time soon.  

None of this is to suggest it is unwise to invest in smaller, local transport projects. Lack of investment here is one of the reasons the UK’s great cities underperform their international peers. The mega, or 15-minute, city should indeed be the aspiration. But it is a false trade-off to see this is an alternative to improved inter-city connectivity and a potential 90-minute nation. As international experience makes clear, the journey from city to megacity to mega-region is an up-only growth accelerator.

Like many of its citizens, this is not now a journey the UK will be making rapidly. Rightly, Sunak last week implored us to think big, bright and long-term. Decades of decision-making around HS2 could scarcely stand in sharper contrast. If it continues to underinvest in long-term transformational projects, few things could be dimmer than the UK’s own growth prospects.