Oxera carried out a sensitivity analysis on the business case for HS2 on behalf of the Oakervee Review, an independent report commissioned by the UK government.

HS2 is a high-speed rail project intended to connect London to Birmingham and Crewe, and, in a potential second phase, onwards to both Manchester and Leeds. The government’s plans for Phase 1—which would be the largest infrastructure project in Europe—were approved by Parliament in 2017, but since then there has been some controversy over the business case. An independent report led by Douglas Oakervee was commissioned in autumn 2019, for which Oxera has provided economic support.

Our report assesses the robustness of the business case to several assumptions made by the Department for Transport (DfT) and HS2 Ltd in their own cost–benefit analyses. In particular, we calculated the impact on the benefit–cost ratio (BCR) of eventualities such as a delay to the opening date, a slower ramp up in uptake, or a different profile of passenger traffic over the 60-year appraisal period.

In addition to these ‘core sensitivities’ to the business case, we also analysed the effect of modifying other assumptions, including the monetary value of passengers’ time, a delay to the second phase of HS2, potential benefits beyond the standard 60-year timeframe, or the wider impact on the economy of better connectivity. We also established how much overall costs would have to differ from current estimates for the project to be classified in a different BCR bracket.

Oxera’s analysis has contributed to the information available to the UK government when making its final decision on whether or how to go ahead with HS2. Today, Prime Minister Boris Johnson told the House of Commons that he has approved the continuation of the project.

Oxera Partner Andrew Meaney said:

Oxera’s work on this vital issue—whether to proceed with spending a vast amount of money on a project with uncertain benefits—demonstrates the importance of robust economic insight into critical infrastructure projects. As HS2 progresses, everyone involved with delivering the project will need to be clear on the benefits it is intending to achieve, and work tirelessly to ensure they are realised.