HS2 will be delayed by another two years and major road building schemes will be deferred after record inflation added billions to the cost of a series of major transport infrastructure projects.

Leading industry figures have described the delays as a potential body blow to the UK’s economic recovery, with short-term savings being a false economy and leading to higher bills in the longer term.

Under the new plans, unveiled by transport secretary Mark Harper, parts of the HS2 line between Birmingham, Crewe and Manchester will be “rephased” by two years, meaning the line to Crewe may not be open until 2036, and Manchester not until 2043.

Trains may also not run all the way to and from central London until years later than planned as the government “takes time to ensure we have an affordable and deliverable station design” at Euston.

Roads have also been hit as transport budgets face severe real-term cuts from 2025. The flagship Lower Thames Crossing, a £7bn tunnel and road scheme linking Essex and Kent, will be deferred for at least two years.

Active travel budgets, including cycling schemes in cities, will also be slashed for the next two years to a total of about £100m, compared with £850m in the last three years.

Transport secretary Mark Harper had told northern leaders earlier this week that the government remained committed to a £96bn rail plan drawn up last year. 

But the plan doesn’t account for subsequent record levels of inflation, meaning less will be delivered for that money than originally anticipated.

Transport secretary Mark Harper said: “We know the power of transport as an engine for sustainable economic growth. That’s why – even in this tough economic climate – this government sees transport investment as a down payment on the country’s future and is committing £20bn over each of the next two years to improve the UK’s transport network.

“But we can’t ignore the current realities. Putin’s war in Ukraine has hiked up inflation, sending supply chain costs rocketing. The responsible decisions I’ve outlined today will ensure we balance the budget at the same time as investing record sums in our transport network to help halve inflation, grow the economy and reduce debt.”

Industry reaction:

Stephen Marcos Jones, chief executive of the Association for Consultancy and Engineering (ACE), said: “Today’s news on HS2 is potentially a real body blow for the UK’s economic recovery. I think every sensible person knows that global events have driven inflationary pressures to record highs. 

“But we have already spent significant sums on the design and delivery of this transformational major project. Scaling back ambitions at this stage will mean the economic and social benefits of HS2 for communities across the UK is further watered down – and major delays like this are actually going to cost more in the longer term. 

“In a nutshell, the delays announced today are, quite simply, an absolutely false economy.”

Darren Caplan, chief executive of the Railway Industry Association, said: “It is clearly disappointing to hear of this delay, which seems to prioritise short-termism over a structured, long-term strategy for what is Europe’s biggest infrastructure project. 

“The delay postpones the immense benefits the project is set to deliver for the country, including extra capacity, more economic growth, improved connectivity – driving levelling up – and hundreds of thousands of jobs specifically in the Midlands and the north, and also to other parts of the UK more widely.

“This stop-start approach to a project is an inefficient use of taxpayers’ money, and could ultimately drive the project's costs up, which is the opposite of what the government is trying to do.”

John Dickie, chief executive at BusinessLDN, said: “Delaying construction of HS2 to save money is a false economy. Failing to invest now will likely increase costs over the long-term while also delaying the benefits for people and businesses across England.

“The country needs this project to remain on track through swift and efficient delivery to drive long-term growth and decarbonisation. Slowing down construction of sections will do little to help levelling-up, particularly in the north.  

“With shovels already in the ground, we cannot afford yet another delay. Ministers should not hit the brakes and instead seize this once-in-a-generation opportunity to create a world-class, high-speed, capacity-boosting rail line that will transform connectivity between England's major cities.”