Does investment in HS2 deliver value for money?

Oxera had a closer look at HS2 (High Speed 2) and what can be expected from a benefit–cost ratio perspective. If constructed in full, the train line is expected to bring positive economic outcomes as well as improving rail connections between the North and South of England in the future.

HS2 will connect London with Birmingham, Manchester and Leeds. The full HS2 project is referred to as the ‘Y network’. Construction of HS2 is split over several phases: Phases 1, 2a and 2b. Although construction for Phase 1 has begun, Phase 2 has yet to be confirmed by Parliament.

The estimated capital cost of constructing HS2 Phase 1 has risen over time. In the 2013 Economic Case, capital costs were expected to be £23.0bn in 2015 prices.[1] However, more recently, it has been confirmed that the costs have risen to £27.18bn (including rolling stock).[2]

While the expected costs of HS2 Phase 1 have been updated over time, the most recent assessment of HS2 Phase 1’s benefits was completed in 2013. Using the latest cost estimates, Oxera calculates the benefit–cost ratio for HS2 Phase 1 as offering low value for money at 1.15.[3] Including wider economic impacts, this rises to 1.36.

While the economic case for HS2 Phase 1 has become less positive, we cannot assess whether the full HS2 Y network represents good value for money from analysing Phase 1 alone. This is because from an economics point of view, part of the purpose of completing Phase 1 is to allow Phase 2 construction to begin. Most of the net benefits from HS2 will come from building the second phase of the network. As such, whether HS2 represents good value for money should be informed by examining the whole scheme, rather than Phase 1 alone. The latest assessment of HS2’s overall value for money (Phases 1, 2a and 2b together) suggests that it has medium value for money, with a benefit–cost ratio of 1.9; when the wider impacts are included, this rises to 2.3.

Andrew Meaney, Partner and Head of Transport –
Sean Thomas, Senior Consultant –


[1] HS2 Ltd (2013), ‘The economic case for HS2’,October.
[2] High Speed 2 Railway Line: Written question – HL8961,, accessed 29 January 2019.
[3] The benefit–cost ratio is a measure of value for money, telling us how much economic benefit (measured in £s) is generated from investing £1 in a project. Low value for money is defined by the Department for Transport as a benefit-cost ratio between 1 and 1.5 Medium value for money is obtained with a benefit-cost ratio between 1.5 and 2.0.

Posted 12/02/2019