HS2 construction delays at Euston could see costs rise to £5bn, finance watchdog warns

Construction delays at an HS2 station at Euston could see costs soar to nearly £5bn, a watchdog has warned.

Earlier this month, the government put the brakes on building the HS2 terminus, blaming soaring inflation.

Instead, the first HS2 passengers will arrive at Old Oak Common station in west London, with Euston now expected to be finished in 2041 rather than 2026.

The local scheme includes a new HS2 station, redevelopment of the mainline station, and housing and commercial units around both.

The National Audit Office (NAO) warned that the cost of a 10-platform station and redevelopment of the 1960s mainline station is likely to be nearly double the original estimate.

It comes after a technical expert said delivering the project within a £3bn budget “would be a significant challenge”.

HS2 told the government earlier this month that its revised estimated cost now stands at £4.8 billion – £2.2 billion over budget.

Gareth Davies, the head of the NAO, said: “The March 2023 announcement by the Transport Secretary pausing new construction work should now give the Department for Transport 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.”

The NAO delivered a stark warning to HS2 number-crunchers: “Further action is now required to develop an affordable and viable station.”

It warned that they cannot deliver the current scheme to budget and have now been hit by inflationary pressures.

During their investigations into the spiralling costs, the NAO spoke to a range of groups affected by the plans, including Camden Council, to hear what they thought about “the effectiveness of governance arrangements” within the project.

The initial £2.6bn estimate for the HS2 station had already soared to as much as £4.4 bn by June 2020 when the government sent the team back to the drawing board and cut one platform from the original 11.

A government review decided the designs and approach “were not satisfactory” and there was limited joined-up thinking between work on the HS2 station and the Network Rail station.

As 2022 drew to a close, HS2 Ltd had spent £1.5bn on buying land and preparatory works for the new station with money from Phase 1, rather than the Euston budget, and shelled out £0.5bn on the station.

Three months later and the government has ordered a two-year pause.

Camden Council leader Georgie Gould said the HS2 project has caused years of misery for nearby residents.

“They’ve already lived through years of disruption with no end in sight. If there is a delay, HS2 must not forget the promises they made to our community and must continue to deliver on them.”

She called on HS2 Ltd to use the delays to create a “fully integrated terminus for both HS2 and Network Rail trains, and allow maximum space for development of new homes, open space and jobs for our communities”.

HS2 and the Department of Transport agreed a £29.2m compensation deal with Camden Council to compensate residents on the Regent’s Park estate so they could move away from the disruption.

Last year, Transport for London pulled the plug on a dedicated bike lane on Euston Road that it said would be needed for delivery lorries on the HS2 site.

The NAO report pointed out uncertainties over the Euston mainline station as “it is not clear if Network Rail can deliver it within its initial estimate of £1.3 billion to £1.55 billion.”

The budget for Euston station was “fixed too early and too low for what was intended to be achieved”, it said.

The NAO warned that the Department of Transport and HS2 Ltd need to use the pause in work “to have a clear understanding of the costs, risks and benefits of their chosen design for the HS2 station within the wider Euston programme, supported by a realistic budget, clear and effective governance and integration arrangements, and long-term certainty on the scope of the project”.

However, its report concluded that they are “yet to demonstrate that the conditions are in place to secure value for money”.

Councillor Danny Beales,  Camden’s cabinet member for new homes, jobs and community investment, said: “Giving up on Euston entirely, or delivering a half-baked station, would be a disaster for Camden and its communities, and destroy the slim credibility HS2 has left.”

He added: “A wholescale redevelopment of Euston Station which brings HS2 and Network Rail trains into a single integrated station will save public money in the long term and deliver huge benefits to Camden and London through the accompanying over site development of new homes, open space and jobs for local people.

“The government committed to HS2 when HS2 Ltd knocked down our residents’ homes, forced our businesses to close and destroyed our open spaces. Today we urge the government to commit to Euston Station and deliver the benefits it promised our communities.”