‘We’ve UNDERESTIMATED benefits of HS2’, experts tell MPs

Conceptual image of HS2
Conceptual image of HS2

The benefits of HS2 to the UK economy are likely to be even greater than the £15bn-a-year predicted in a landmark study earlier this year, government advisors have claimed.

Experts from KPMG told the Commons transport committee they expect to release an updated version of their analysis of the economic impact of high-speed rail next year.

The accountancy firm’s first study, published in September at a cost to the government of £200,000, claimed HS2 would have a ‘transformational’ impact on the UK economy, adding £15bn a year to national GDP.

Most of the benefits, it said, would be felt in the north of England.

KPMG’s global infrastructure chief Lewis Atter said the study was based on the best available data from 2012 – but more information was now available, with further work required to bring the study up to date.

He said: “We expect there to be things which take the (£15bn) estimate down – but the list of things that take it up is longer.

“So on balance, we expect the number to go up.

“For example, nowhere in this analysis is there any assessment of the economic benefit of the additional capacity for rail freight.”

He also explained why the benefits for the north would be so much greater than for London, with improved transport links allowing regional cities to capitalise on their cheaper goods, property prices and labour markets.

“HS2 lowers the barriers to competition between London and other places.

“Yes, London is more (economically) productive – but it is also much more expensive.

“The cities in the Midlands and North have a net cost advantage over London.

“One of the reasons they are not competing as well with London as they might is the transport costs between them are too high.

“HS2 reduces those transport costs, and means the North and Midlands can take advantage of their significant cost benefits.”

KPMG was forced to deny its report sought to play down the fact that some parts of the UK will lose out as a result of HS2.

The report found that while every part of Yorkshire will benefit, some towns and cities – including Aberdeen, Cambridge and Bristol – would see their local economies shrink as the new line draws business and investment elsewhere.

KPMG infrastructure head Richard Threlfall denied that information had been hidden, pointing to a graphic within the report which illustrated the ‘winners and losers’ in map form.

“We thought we were very open about this,” he said.

“The other point that’s important is this is just in relation to this scheme.

“You can also expect the Government to be spending on a whole range of (other) investments in these areas over that time. It’s not the case they are losing out in the round.”

Appearing later, Transport Secretary Patrick McLoughlin said: “Nothing else does the job as efficiently as HS2 will do.

“HS2 is vital to the economy and the future prosperity of the UK.”

He said it was to be expected that major schemes will mainly benefit those parts of the country they serve.

“We are spending £15bn at the moment (in London) on Crossrail, and £8bn on Thameslink, which will bring massive benefits to the areas they serve,” he said.

“It doesn’t bring huge benefits to the areas it doesn’t serve. But it’s important for the UK’s infrastructure as a whole.”