HS2: economic boon or expensive luxury? | Commercial awareness on The Gateway

HS2: economic boon or expensive luxury?

Will Hodges examines this controversial proposed infrastructure project and asks what it might mean for students and graduates

Everyone needs a legacy. Margaret Thatcher had the Channel tunnel and Boris has his bendy buses. For David Cameron it looks like being HS2. High Speed 2 (HS2 for short) is a proposed high-speed railway that, if completed, will place two thirds of the population of northern England within two hours' journey time of London.

The first phase of the HS2 project, connecting London with Birmingham and the Midlands, is set for completion in 2026 and will cut the journey time between the two cities from one hour and 24 minutes to just 49 minutes. Trains will travel at speeds of up to 250 miles per hour - making it the fastest railway line in Europe. Phase 2, which is expected to be finished in 2033, proposes to construct an onward "y" network that will branch out from Birmingham to Manchester and Leeds. An additional rail spur will then connect the whole network to Heathrow airport.

Not so grim up north

The benefits of HS2 are expected to extend beyond fast travel times. A report released by professional services firm KPMG estimates the link will boost the UK economy to the tune of £15 billion a year while creating 100,000 jobs in the process. The freight capacity of the rail line, meanwhile, is expected to ease traffic congestion by removing 500,000 lorries from the UK's roads each year.

The main beneficiaries of HS2 are expected to be the north and Midlands. KPMG projects that Birmingham's economy will grow by between 2.1 and 4.2 per cent as a direct result of the rail link, while Leeds will see an increase of around 1.6 per cent and Manchester of between 0.8 and 1.7 per cent. By contrast, London is projected to experience a boost of just 0.5 per cent in economic terms.

A tale of two regions

It's hoped that this growth will help to close the longstanding economic divide between southern England and northern parts of the UK, which many claim has been steadily widening since the start of the global economic downturn. While London and the south east have made a relatively healthy recovery since the trough of the downturn during 2008-2010, many other regions of the UK are lagging behind.

Unemployment rates in certain northern regions remain considerably higher than those in the south. Recent data released by the Office for National Statistics shows the number of workless households in Liverpool standing at 28.7 per cent, compared with 10.6 and 11.4 per cent in Hampshire and Surrey respectively.

A quick glance at trends in the UK housing market reveals a similar story. The most recent data shows that average house prices in London rose by 8.1 per cent in the 12 months to June 2013. This compares with growth of just 1 per cent across the UK as a whole with certain regions including Scotland and north-east England recording a contraction in the average price of homes.

And average salaries across the UK continue to grow in a distorted manner. The median salary in London, £27,560, is almost 50 per cent higher than that of Manchester (£19,225) and Scotland (£20,862). At the top end of the scale, residents of Westminster were shown to be earning £39,745, while, at the bottom, Blackburn's inhabitants earned £15,575 on average.

Money for nothing?

The potential downsides to the HS2 project have not been overlooked, however. The rising cost of construction has been one of the main sources of contention with the government recently revising the cost of building the railway upwards from £32 billion to more than £50 billion at the latest count. The director general of the Institute of Economic Affairs, Mark Littlewood, called the scheme "a colossal waste of money", while London's Mayor Boris Johnson said of the cost of the project, "keep going till you reach £70"‰billion, and then keep going".

However, some young people, who are the group most likely to reap in full any economic rewards of HS2 during their working lives, can see the benefits in splashing out. Josh Miller is a recent Durham University graduate working for a London-based real estate services firm. His role looking after clients in the north-west of England means regular trips to the region. "It currently takes me more than two hours to travel between London and Manchester," he says. "HS2 would reduce my journey time to just over an hour and allow me more time to spend with clients. From a business perspective, it's a no brainer - people like me could have more time for meetings, making deals and driving new business instead of spending it sitting on a train or in a car."

Education, education, transportation

Others disagree. One of the main groups in a position to benefit from faster transport links are university students who often have to travel hundreds of miles between campuses and their home towns during weekends and holidays. According to social research agency Education Research Services (ERS), four out of five UK students choose to leave home to pursue further education, one of the highest rates worldwide.

Sam Foster is a second year student from London studying Modern Languages at the University of Birmingham. "Travelling between London and Birmingham is actually not as bad as people make it out to be," he says. "The train between London and Birmingham takes an hour and a quarter and costs £33 with a student railcard."

"To me, the decision to spend an obscene amount of money to build something new essentially just to shave 30 minutes off the current service seems somewhat absurd. The only way I can see for the costs to be covered would be to charge passengers a fortune to take the HS2 service, which would put it out of reach for students like me."

However, it is unlikely the concerns of a small, albeit vocal, minority will be enough to undermine popular feeling for the project among UK businesses. With the coalition government's efforts to reinvigorate the UK's battered economy currently winning praise from business owners, HS2 is likely to fall under the category of another expensive yet necessary injection to boost growth. Cameron's legacy appears safe for now.

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