Out of line  Britain must learn from the HS2 debacle

Sir Geoffrey’s damning remarks, made in February, came 16 months after then Prime Minister Rishi Sunak cancelled the remaining northern leg of the proposed high-speed railway. What was once the UK’s largest-ever infrastructure build is now a shadow of its former self. Many critics argue the diminished project will do little to level up the UK, or improve UK rail capacity. How could such a totemic plan have gone so badly wrong?

The idea of a high-speed rail line connecting the north and south of England was conceived in 2009, during the final months of Gordon Brown’s Labour government. Then transport secretary Andrew Adonis had been encouraged by the successful delivery of HS1 – linking London to the Channel Tunnel – and the widespread adoption of high-speed rail links across continental Europe.

The original cost estimate for a full Y-shaped network linking London, Birmingham, Manchester and Leeds was £32.7 billion (at 2011 prices). Yet by 2019, costs had spiralled out of control. Faced with an estimated price tag approaching £100 billion, the government abandoned the route to Leeds in 2021. This was followed by the cancellation of the Birmingham to Manchester leg in 2023. Although labour shortages and more expensive raw materials have been common challenges for all organisations since the pandemic, the HS2 debacle cannot be explained by external factors alone. Ultimately, HS2 represents a failure of governance. A recent investigation conducted by the Institution of Civil Engineers provides a compelling insight into its key failures.

A fatal flaw at the start of HS2 was inadequate design and planning. The then Labour administration was keen to ensure the project would survive a possible change of government. For that to happen, it viewed it as imperative that the business case be calculated at speed ahead of the 2010 general election. Its haste resulted in a hugely inaccurate assessment of the likely risks and costs, including those that might arise from legal, planning and environmental challenges. The design specifications were overly ambitious. External scrutiny and stakeholder consultation were insufficient.

Most importantly, a compelling strategic rationale was never fully developed. In justifying the project, there was excessive focus on reducing journey times rather than the wider benefits to the UK economy. As a result, a broad public consensus in favour of the project never emerged. The scheme quickly became exposed to public backlash, especially from those affected by the requisition of land along the route whose lives were disrupted. Without clearly defined and agreed objectives, it became easier for stakeholders to demand changes and adjustments, which substantially increased costs.

A second major problem was a lack of clarity in project organisation. Responsibility for delivering the project was handed to HS2 Ltd, a corporate entity entirely owned by the Department of Transport. On the face of it, it made sense for an arm’s-length body to run the project. Such a body would be well placed to build a delivery team with the right skills and experience. However, as the project moved into implementation phase, the relative roles of HS2 Ltd and government over decision-making became increasingly blurred. Public objections and legal challenges to HS2 began to accumulate. Ministers faced increasing pressure to play a more active role. This further exposed the project to short-term political considerations, which resulted in costly delays and changes to project scope.

A lack of clarity over decision-making also arose due to HS2 Ltd delegating too many crucial responsibilities, including design and assurance, to external consultants and contractors. This resulted in HS2 Ltd losing the capacity to act as the ‘guiding mind’ of the project. It became less able to standardise the design features of the construction process – a factor leading to increased costs.

A third issue was HS2 Ltd’s approach to procurement and contracting. In the hope of reducing the number of interfaces with contractors – thereby minimising the complexity of project management – only seven major contractors were engaged in phase one. This soon became four, as several contractors combined their lots. A major imbalance of power soon emerged between the contractor group and HS2 Ltd. The former were in a strong position to demand changes relating to their contractual arrangements, and to push up costs.

The lesson

What can business leaders learn from the HS2 debacle as they embark on major infrastructure or capital investment projects in their own organisations?

1. It is essential that sufficient time and resources are devoted to planning and risk assessment at the outset of a project. Objectives, scope and timescales should be clearly defined. They should be subjected to rigorous independent scrutiny – particularly if the project is seeking to adopt technical or organisational solutions that are not tried and tested. Key stakeholders should be properly consulted to achieve a sense of buy-in and shared ownership. Once a project is underway, it is much more difficult and costly to adjust – and the planning process should seek to keep these to an absolute minimum.

2. A stable and predictable governance structure must be established with strong leadership. There should be clarity over decision-making and accountability. The role of suppliers in the overall project structure should be carefully considered. Key strategic decision-making and oversight should be kept in-house, and closely monitored at board level.

3. For projects extending over longer timescales, it is also important to ensure that corporate memory is retained – so that turnover of those in key positions does not result in mistakes being repeated or the continual revisiting of past decisions. Induction, exit interviews and succession planning should all be core aspects of project design.