The two year pause on construction work at HS2 Euston and Phase 2a Birmingham to Crewe could be spent wisely, developing a design that is affordable, deliverable and value for money, according to a new National Audit Office (NAO) report.

However, the report also cautions that delaying the project could increase costs in the long term – something that will need to be “managed closely”.

Earlier this month, the Department for Transport (DfT) deferred the work at HS2 Euston and Phase 2a Birmingham to Crewe due to inflationary pressures – and at Euston, HS2 Ltd also reported that the latest cost estimate for the 10-platform design is £4.8bn - £2.2bn over budget.

The announcement came three years after the NAO reported work at Euston was more complex than originally anticipated and that there was uncertainty over the HS2 station design - statements which were closely followed by the Oakervee Review raising concerns about the design of the HS2 Euston station and concluding that the existing design was unsatisfactory.

Revisions to the design were subsequently made in 2020, including reducing the number of platforms from 11 to 10 – but the estimated cost of the project is now £0.4bn more expensive than the previous 11-platform design.

In Autumn 2021, the Department for Transport directed HS2 Ltd to integrate more closely with Network Rail's redevelopment of the existing rail station and confirmed the extent of the surrounding commercial and residential developments. 

Much of the previous design work was then scrapped, at a cost of £106m to the taxpayer, despite DfT's efforts to minimise this.

Gareth Davies, the head of the NAO said it was clear the 2020 “reset” of the station design had not succeeded, with the government having to revise the plans yet again. 

“DfT and HS2 Ltd have not been able to develop an affordable scope that is integrated with other activity at Euston, despite their focus on costs and governance since 2020,” he said. 

“Recent high inflation has added to the challenge.

"The March 2023 announcement by the transport secretary pausing new construction work, should now give DfT 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 National Audit Office says a potential overall increase in costs in the long-term will come from stopping and re-starting work, contractual changes, and managing the project for longer.

The recently announced project delays have come despite the DfT’s response to the Oakervee recommendations in December 2021, when it formally established the Euston Partnership to bring together the different bodies involved with projects on the Euston site, including delivery of HS2 Euston station.

Following the transport secretary's announcement in March 2023, the DfT will now need to consider how best to control the budget while developing an affordable and deliverable design.

By the end of December 2022 HS2 Ltd had spent more than £2bn on the HS2 Euston station and its approaches, including design, land, and preparatory works. 

The land purchases and preparatory works cost £1.5bn and were funded from the wider HS2 budget. 

Budget pressures on HS2 Euston station have now been compounded by significant inflationary pressures across DfT's capital programme. 

In the first instance, HM Treasury (HMT) requires the DfT to absorb inflationary pressure, which has risen significantly since the forecast in 2020, within its existing cash budget. 

The NAO's report recommends the DfT works with the Euston Partnership, HS2 Ltd, Network Rail, Lendlease and local partners to reassess the expectations for the HS2 Euston project, its budget, and the public benefits. 

It also suggests setting out clear aims and measures as part of the programme reset7 and applying the lessons it has learned to HS2 Manchester stations and other parts of the programme.

You can read the full report here.