Vampire railway: High Speed 2 to suck life out of local economies

HS2 Distortion 200The case for High Speed 2 is looking more and more like a Tonka project – a big showy toy that politicians can brag about, but will do little for the UK’s economy. And it is not an equitable project. It is set to damage the economy of areas like east of England and boost London at their expense.

It’s not long since KPMG published a report claiming that the line could boost the economy by £15 billion a year. Now BBC’s Newsnight reports that the KPMG report left out data on those areas that stand to lose out from the project.

In cash terms, the BBC lists Aberdeenshire, Aberdeen City and Moray  as faring the worst, losing £220m a year by 2037. But local economies are different sizes, so it helps to look at percentages.

Taking the worst case scenario, there are eleven areas that stand to lose more than 1% of their GDP if High Speed 2 is built. Ten of these are in a belt stretching from Wellingborough in East Northamptonshire to Cambridge (see table below).

That’s a big growth area for housing and employment. On KPMG’s analysis HS2 is set to suck jobs out of the area. So what will happen? More people will have commute to London, boosting the capital but overcrowding trains.

Eighty eight of 236 areas across the country will lose £2.5 billion from their local economies if HS2  is built; 148 will gain £17.8 billion. Its a gain overall, but its also a major distortion to local economies and a statement by the government that London, Birmingham, Leeds and Sheffield matter more than Corby, Kettering and Lancaster.

High Speed 2 Ltd, the government’s champion for the line, told the BBC the results were “unsurprising” and claimed that the government planned to spend £73 billion elsewhere. That’s not quite the case.

According to the statement made by Danny Alexander in June, the government is planning to spend £73 billion inclusive of £16 billion for the first stages of HS2. Only £22.5 billion goes to Network Rail, most of the rest on roads. But the real difference is that if costs for HS2 continue to soar, or the economy does not grow quickly enough, it is these projects that will be delayed, cut back or axed, not High Speed 2.

Once we start High Speed 2, we can’t turn back. It can’t be the railway to nowhere. But it could be the vampire railway that sucks much of our country dry at the expense of the narrow corridor of cities that benefit, and most of all London.

High Speed 2 has become an act of faith rather than a rationale proposal. The government and HS2 Ltd need to come clean on it and stop playing footloose data.

But I for one don’t have faith in vampires. Especially one that will suck the lifeblood out of local economies to feed London.


HS2 Data Losers

The full data set is here in PDF. Full data Excel spreadsheet: High Speed 2 KPMG BBC winners and losers


* Andy Boddington is a Lib Dem councillor in Shropshire. He blogs at

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This entry was posted in News and Op-eds.


  • My LSE colleague Henry Overman has argued that the KPMG methodology overstates both the winners and losers by a factor of about five. If he is right – and he is Britain’s leading economic geographer – then both the gains and losses to individual places from HS2 are relatively small. Applying this ratio to the KPMG numbers suggest that areas that gain would do so by the equivalent of raising wages by about £1 per week, while loser areas would suffer by about 30p per week.

    The essential point must be correct however – if the railway runs non-stop from London to Birmingham, rather than stopping at Coventry as now, then Birmingham will gain at the expense of Coventry.

    I am bemused that the KPMG finds Swindon and Winchester are winners. Similarly, the Highlands are listed as the second biggest potential winner, while Dundee and Angus are the biggest potential loser. It doesn’t seem plausible to me that the differential effects can be that large, given that the railway doesn’t run to either.

    I am not convinced, therefore, that the KPMG report has added a lot to the debate.

  • But of course it isn’t that is it Joe. The question is whether overall, there is a reasonable balance of benefit from all government projects across all areas.

    What is perfectly clear from the results is that there is a massive skewing of government investment into a few favoured large cities and the south east, at the expense of most towns in the rest of the country, as has been the case for most of the last twenty years. In my town, we have seen deliberate government disinvestment, partly direct e.g. closure of the local tax office, rundown of local hospital, and partly indirect e.g., utilities, after being privatised, choosing to centralise functions in the big cities. Nothing is done about this and most people just ignore it.

    All in all, if you are not in a big city or the commuter belt around it, you are at best ignored and at worst deliberately targeted by central government. And this with a party in government that says it believes in diversity, subsidiarity and localism.

  • Richard Church 19th Oct '13 - 10:49am

    “But I for one don’t have faith in vampires. Especially one that will suck the lifeblood out of local economies to feed London.” That statement just isn’t supported by the statistics.

    Economists struggle to predict GDP figures a year or two hence, so fractions of a percentage in local areas 25 years hence is meaningless. There are though areas which will benefit by significantly more than a fraction of a percentage on these figures though, and they are not in London, all parts of which gain by less than 1%.

    These are the ones I have spotted that are over 5%. Birmingham +5.3%, Cannock & Lichfield +5.9% Erewash + 8.1% Nottingham +6.4% North Warwickshire +5.0% Solihull +6.6% South Lancashire +6.7% Tamworth +5.1% Nottinghamshire West +5.4%. Others over 3% stretch over the industrial towns of Nottinghamshire, Derbyshire, South Yorkshire and the West Midlands. Hardly vampire cities, and more in need of inward investment than Cambridge, which is doing very nicely already.

  • How depressing.

  • @Joe Otten
    “We would have no infrastructure at all if we took this attitude”

    Or alternatively we could look at whole areas where there is a shocking lack of infrastructure, such as the South West from Exeter westwards, and attempt to bring them to the level other regions had in the 1980’s. Plymouth, Truro, Falmouth, Penzance Redruth, Camborne, Tavistock etc etc. All with no access to the motorway network, terrible congestion in tourist season on the available roads, airport closures, and an existing train line about to literally fall into the sea between Exeter and Newton Abbot. The trains don’t crawl along at Dawlish and over Brunel’s majestic bridge at Saltash for the benefit of tourists, it’s because of the danger that would be involved in going any faster.

    Yep, let’s forge ahead with HS2, massively help Birmingham and London and leave the South West to die (and other areas, but I happen to know most about the area where I run a business). Businesses relocate or don’t set up here in the first place. We don’t want special treatment in this part of the world but we are getting fed up with being left further behind and being increasingly unable to compete.

    This approach to infrastructure is tantamount to just teaching kids that are bright enough to achieve A*’s with some additional input and ignoring those who are struggling to reach the level of literacy and numeracy to get by.

  • Peter Watson 19th Oct '13 - 11:18am

    I think Andy Boddington sums it all up with “High Speed 2 has become an act of faith rather than a rational proposal.”

  • Alisdair McGregor 19th Oct '13 - 12:42pm

    “But it could be the vampire railway that sucks much of our country dry at the expense of the narrow corridor of cities that benefit, and most of all London.”

    This sentence shows you obviously don’t understand railway usage patterns.

  • It reminds me of some big software developments I’ve been involved in over the years, which got built for better or worse through sheer strength of will alone.

    It doesn’t matter how many statistics, reports or feasibility studies say it will be bad (or good) for the country the people who matter in the government want it built. Nobody really knows the costs and benefits that are going to come with it.

    It’s going to happen, we probably should just get behind it and make it as good as it can be. There’s very few big transport projects that people regret building in the long run (except the Channel Tunnel maybe). I just hope we focus on building up infrastructure in the north of England, Scotland and Wales at the same time. For example the fact there’s no decent motorway between Sheffield and Manchester, two of the north’s biggest cities separated by less than 40 miles is a joke!

  • Presumably Mr. Leunig’s solution to Heathrow would be classed as a vampire project on the same grounds that it would suck public investment out of Shropshire. The logical conclusion as one writer says above would be to can all infrastructure projects as they suck public money out of other areas. Actually, why don’t we apply the same rules to other public services such as the NHS, it seems to have vampiric qualities as laid out above as well…

    As the above commentator points out, there is a serious lack of understanding in how railways work and what HS2 brings to the table, especially in terms of additional track capacity. I shall be interested if the same characters who are whingeing over HS2 will be whingeing next year when the WCML is shut for 2 and a half weeks at Watford: I can see the moans about extra journey times, third world railway and the rest. It would be a fascinating PHD to see how much a single blockade will cost the nation compared to building a 28bn railway.

    Perhaps Mr. Leunig can ask Terry Gourvish who does know a thing or two about railways and teaches at the same institution…

  • I am getting sick and tired of this report and that report that concentrates on negativity. Every project in the world has a down side, some to a greater extent than others. This report like so many others says this might be the case not that it actually will, because no -one can be that specific. Knowing Lancaster well I cannot understand how this is included. There is no way HS2 cannot benefit the economy, the discussion might be how much, not how little.
    I remember when the motorways were being built or being planned, we do not need them, blot on the landscape, what’s the point, waste of money etc. No doubt most of those against HS2 use the motorways!!! I was looking at some Victorian records, you can guess what was said about the railway development, just like the HS2, costs too much, not needed, we’e got canals!!! and so on.
    We owe our children and grandchildren a future and that is not how we are now. In thirty years time people will read the comments from Andy and probably shake their heads or laugh.
    Come on, move into the future not the present.

  • Richard Dean 19th Oct '13 - 2:14pm

    A new low for the anti-HS2 lobby? Talk about scraping the barrel! Or is it opening the coffin?

    Can’t even do basic arithmetic? “Eighty eight of 236 areas across the country will lose £2.5 billion from their local economies if HS2 is built; 148 will gain £17.8 billion.” So the overall gain is 148 x 17.8 – 88 x 2.5 billion = £2.4144 trillion. Either someone has got their numbers wrong or this is a massive plus for the country.

    Losing 1% of GDP over a 30 year period is probably not even noticeable. For a big town of 100,000 workers, it’s about equivalent to three workers moving out of the town per month. Probably nothing at all compared to normal internal migration rates.

  • Peter Davies 19th Oct '13 - 2:30pm

    It would be interesting to see figures for all the rail projects the government has approved taken together. The Great Western electrification and the Varsity Line in particular benefit two major areas which lose from HS2.

    @Steve Way. You’re right that the South West is badly damaged by the lack of decent rail connections beyond Exeter. Electrification from Bristol to Exeter is the obvious next phase and should cut your total journey times but what exactly can we do between there and Plymouth?

  • In the short term there will be upsides economically, there will be downsides economically.

    But, the simple reality remains that the current line is already stretched to capcity. I make three round trips from Birmingham to London every week, one small delay outside of London and the whole network creaks to a halt – it took an extra 90mins to get home on way day this week. They increase the number of carriages from 9 to 11 and within six months or so the 11 carriages aren’t enough at peak times.

    People standing in the isles and at the end of carriages from Birmingham to London is far from uncommon (people were standing down the entire length of the carriage from Milton Keynes to Euston on Thursday.

    This is a Victorian network struggling to cope with modern times. Goodness knows what state it will be in within 15 years if it is not managing to run to an effective service now.

  • Well, all the areas local to me are 1, on the winners list and 2, nowhere near London.

    I’m all right, Jack.

    More seriously, even if the list is as inflated at Tim says (and I trust Tim on these matters) there’s still a lot more winners than losers, and as ATF points out, added capacity is going to be very very welcome.

  • “High Speed 2 has become an act of faith rather than a rational proposal.” [AB]
    It always was a vanity project, the only rationale to it was to make New Labour look ‘with it’.

    “It’s going to happen, we probably should just get behind it and make it as good as it can be. ” [GW]
    I have some sympathy to this attitude until you look and see that the project was flawed from the outset, namely it lacked real vision. Then at all stages decisions are being made to cut the ever spiralling costs – as per HS1 (The good thing about the Chunnel was with the French involved and the fact it was a long tunnel under the sea it was a do it properly or not at all project. So HS2 is looking more and more like a project that will enable the “we have a superfast train line” box to be ticked, but it won’t be anything special or be proud of, hence a totally pointless exercise and so best killed off.

  • I was just skimming this, but then I saw Richard Dean’s joke arithmetic.

    “Eighty eight of 236 areas across the country will lose £2.5 billion from their local economies if HS2 is built; 148 will gain £17.8 billion.”

    That’s £2.5 billion lost overall and £17.8 billion gained overall, which is where Patrick McLoughlin got his £15 billion figure. £2.4144 trillion was just satirical wasn’t it?

    I know that there are many other schemes proposed, and occasionally we do hear a bit about how they will fit together, but HS2 is given all the spotlight and the others naturally seem to be lower-priority jobs.

    Mr McLoughlin, tell me…
    how a business person can get from Exeter to Lille without changing several times at bloody London,
    or how the Cardiff to Newcastle route will be improved,
    or how someone flying into Heathrow (or some alternative London provision, or Manchester, or…) can transfer sensibly to a high-speed train link rather than just hopping on another plane…
    and I’ll admit you may have something approaching a plan.

  • @Peter Davies
    It needs a new line, or at the very least substantial improvements, just the type of improvements being considered elsewhere. But it is not just the railways that badly serve the Westcountry. There is no motorway or regular air link. We stand to be so far behind by the time these are even considered that those of us trying to run companies that require significant interaction with the remainder of the country will have either sold out to a larger organisation or moved. Either way local jobs go.

  • Richard Dean 19th Oct '13 - 3:44pm

    Ah, a bit of clarity! And the anti lobby even stoop to suggest that “Eighty eight … areas … will lose £2.5 billion” – which leaves open the possibility of EACH!

    Here is a question for an 8-year old:
    If 88 workers lose £2.50 from their pay packets, how much does the workforce as a whole lose?

  • Richard Dean, that’s a fair question, but the bare numbers in the example here make it implausible to follow that logic and all the news reports suggest a different interpretation.

    By the way, I’m not exactly anti-HS2 but I’m certainly not convinced by the current plan.

  • I used to work for a large company, reviewing capital proposals from subsidiaries and helping to knock them into shape before they went to the board. On the basis of that experience HS2 rings all the alarm bells – poor project scoping, shifting and unconvincing justification for the project and less than full and frank disclosure of issues. The company I worked for used to do a lot of a politically-driven projects and they always screwed up until a change in management brought a new approach (which was when I moved into the job). The turnaround that followed was remarkably fast and strong; the result, quite simply, of some integrity and an evidence-based, approach.

    There may well be a good project to be done around high speed rail but the government hasn’t found it yet. Lib Dems are supposed to be in favour of transparency and evidence-based working; this would be a good time to apply those ideals.

  • Richard Dean 20th Oct '13 - 12:27am

    Can GF provide evidence, I wonder, of HS2 and “poor project scoping, shifting and unconvincing justification for the project and less than full and frank disclosure of issues”. How much of this is a matter of agenda-prone judgment rather than rational assessment?

  • @Richard: “Can GF provide evidence”
    There is more than sufficient evidence out in the public domain to reach the conclusion GF has reached, perhaps you need to look at it again, not from a pro or anti stance but from an evidence based project delivery approach.

    Firstly, there is the evidence of 2010. The country was in meltdown with “eye watering” debt’s that would take decades to pay off, HS2 fails the acid test: will it generate more income than expenditure before 2020 and so help pay down the national debt? the simple answer is no, hence it should of been mothballed/binned then.

    Secondly, there is the evidence of Peter Mandelson, who was there when the wheeze was thought up and confirms the total lack of rigour surrounding the creation of this project. Whilst you may wish to believe he is unreliable, no one who was also there, has stood up and called him a liar.

    Thirdly, we can take the original public proposal and compare the political announcement with the details of the plan. The details didn’t backup the announcement. For example, the line didn’t go from London to Birmingham, it stopped outside of Birmingham and travels were expected to change on to a WCML train for the 15 minute journey into Birmingham – thereby nullifying the time savings made. Likewise the details contained no economic or business case that support to the claims the government made about the line. In fact the government have activity discouraged and avoided any substantive discussion of the economic and business cases, it should be of concern that the PAC has only reviewed this project this year (2013), when it has been running since before the 2010 election and spending significant amounts of public money (up to March 2013 the project burnt £253.23m) and will increase it’s burn rate further as it prepares planning applications and procurement. Other projects that have received similar verdicts as HS2 from the PAC, have resulted in projects being cancelled and political heads rolling…

    Fourthly, we can see how both the plans and political case have developed since then and see if there has been a rational basis for them. Here we’ve seen the government grasping at straws, such as this KPMG report, for the economic case, in the same way a gambler may eventually win and say “I told you I would win”. Likewise it’s proposed route extensions seem more to try and bribe people to support it rather than being based on coherent national development strategy – it has echo’s of how the Victorians planned the routes of their railways.

  • The final point I missed off, was that you only needed to compare the HS2 proposal with the proposals for other railway infrastructure enhancements, that the government finally gave the go ahead to earlier this year, to get some measure of just how poor the HS2 proposal really is.

  • Richard Dean 20th Oct '13 - 5:44am

    None of that is evidence of anything other than a welcome development process. All major projects go through changes in their early, pre-lift-off stages. That’s a good thing, not a bad one, because it allows a project to improve as a result of interaction and participation with people.

    Your first point about meltdown has got nothing to do with HS2 and everything to do with your own objectives. Your second one relies on an unreliable and agenda-weighted source. The third one I have already addressed – the development from general plan to specific details is precisely the kind of people-sensitive interaction that LibDems tend to support. The fourth one is your own biased interpretation about bribery and corruption!

    Let us take GF’s first judgment, “poor project scoping”. I’m not sure what GF means by “scoping”, but the scope of HS2 is pretty well defined by the requirement to add capacity and the proposed routing and station-stops. What is “poor” about the scope of this project?

  • Richard Dean 20th Oct '13 - 5:45am

    On your final point, you present no evidence at all! Where is the comparison made? What are its criteria? How are its judgments made?

  • The first post @JoeOtten had it right. There’s no argument here. HS2 won’t help Cardiff much because it doesn’t go there. Gedaway. It won’t ‘suck the lifeblood’ out of anywhere.

    The nimby luddite arguments against HS2 are getting more and more pathetic. Can we just build the thing now.? And if we need to cut costs can we get rid of some of the many miles of unnecessary tunnels and cuttings that have been put in to make the nimby luddites happy?

  • Last year I lobbied Norman Baker because evidence from the continent suggested that places like North Staffordshire would not benefit from HS2; in fact we would suffer. He said he would not be in favour of HS2 if he thought that would be the case. So what does he and our other leaders say now ?
    Since that meeting, work has been done gathering evidence about likely effects on North Staffordshire. We now have firmer evidence that not only will HS2 be a disadvantage to the area economically, but it will definitely lead to a major reduction in the existing type of train service, because the present service is dependent for its viability on passengers travelling from Manchester; these passengers will not be using this service if HS2 goes ahead.
    HS2 is a very inequitable project, especially since our distribution of population north of Birmingham is very different from most of the continent.

  • Although I’m strongly anti-HS2, I don’t think this new analysis of the KPMG figures adds a lot to the debate one way or another. As Tim Leunig said yesterday, Prof Overman’s expert critique of the KPMG study said that the whole analysis was overstated many times over. The supposed net benefit of £15 billion p.a. is a massive over-statement, and so are the dis-benefits to places not on the line of the HS2 route.

    The real debate about HS2 should get back to realistic future demand forecasts, the strategic alternatives to providing additional capacity, and the opportunity costs of the £50 billion spend on HS2 versus other infrastructure projects.

  • Andrew Colman 20th Oct '13 - 1:14pm

    The problem is not HS2, the problem is relying on the financial markets (which caused the 2008 crash) for our future prosperity.

    HS2 actually contradicts the ideology of the right which says provided we reduce tax and deregulate, the private sector will suddenly pull a rabbit out of the hat and magically deliver prosperity. This is why , I believe there is such a hostile campaign against HS2 in the right wing media.

    HS2 alone will not fix everything . Other projects are needed too, eg upgrade of rail links v to the SW, massive investment in offshore wind, solar and fusion power generation to replace polluting fossil fuels which are fast running out. Fracking is no solution either, it will only provide a temporary respite at first and benefits may well be outweighed by huge costs in buildings being damaged by subsidence and polluted water supply.

    HS rail and large scale renewable energy will provide well paid work for millions (directly in construction and indirectly in servicing the needs of those employed). It will end mass unemployment and lead to major reductions in benefits which will no longer be needed.

  • @Richard – “a welcome development process”
    You, and all of us, need to exercise caution and not allow the benefit of hindsight and our personal bias to create a plausible narrative to wrap around events. Remember HS2 was not presented as a capacity increasing project, it was presented as a way of getting from London to Birmingham in 45 minutes and a “me too” project; the capacity case came out of subsequent work by HS2 Ltd. These are facts, we can argue about the interpretation and narrative we choose to place around those facts.

    Yes, good projects do develop and a fully defined project to create a new high speed rail network isn’t worked up overnight. However, the development of project from inception into something that is ready for build is a planned and transparent process which includes regular rigorous reviews with the option of termination. There is no evidence that this has been and is the case with HS2. The various political parties have been clear from 2010 that there is no termination option without giving any rational evidence-based reason for this stance and hence have effectively thrown good practise out of the window and resorted to statements of blind faith in the project, thinking that if you repeat the job creation mantra often enough, it will become true.

    My points were more about where to look for evidence that would support the reaching of the conclusion GF arrived at with a few examples to illustrate the point, rather than providing a catalogue of evidence supporting the conclusion GF had reached. As you indicate, the problem we have is that because the major political parties have blindly committed to the project the debate has become highly polarised and increasingly divorced from rational evidence-based debate.

  • Tony Greaves 20th Oct '13 - 5:05pm

    It seems that once again one of the controllers of LDV is using his position to promote his own prejudices! I suppose we should just get used to it.

    It is clear that the KPMG report is garbage, not least because it assumes that HS2 is a stand-alone project and the only rail-based infrastructure project that will happen in the next 30 years. It also appears toassume that the sum of national transport infrastructure investment is fixed, and that GDP is some kind of zero-sum game.

    But some of the places quoted are daft really. Lancaster? Why should that town suffer by getting more and faster rail services to Birmingham and London? Aberdeen? Why should Aberdeen suffer? Cambridge? Cambridge is already propserous and has all the rail services to London that it needs. But freeing up capacity on the ECML would make it possible to run new London to Yorkshire/NE services via Cambridge. Coventry? There will obviously still be plenty of Coventry to London services.

    Indeed, many of the intermediate points on the WCML may get better services if the non-stop ones are diverted to the new line.

    As for a new motorway between Sheffield and Manchester, Gareth, there’s just a slight problem. It would have to go through the Peak District National Park. But you could have amuch better rail service, including re-opening the Woodhead line.


  • Tony Greaves 20th Oct '13 - 5:09pm

    I was also going to comment on the idea that HS2 will serve a “narrow corridor”. The West Midlands? the East Midlands urban area of Nottingham and Derby? South Yorkshire? West Yorkshire? the whole of the North West? And the further benefits for the North East and Scotland?

    Odd to think this is all a “narrow corridor”.


  • As the KPMG report is “garbage”, as Tony Greaves says (and I agree with him), can our leaders also stop trumpeting its £15 billion p.a. net benefit figure as a rationale argument for why HS2 should be built?

  • Richard Dean 21st Oct '13 - 2:55am

    A KPMG report dated September can be obtained by clicking a link on the following webpage:

    Is this is the report being discussed? A quick perusal suggests it contains an awful lot of guestimation. Also, the report seems to focus only on HS2, not on other aspects of government policy. Some other aspects may offset the apparent losses from HS2 for some regions. On page 15 the report states:

    there are a number of areas that merit further analysis …; the scope for addressing these continues to be developed, particularly the impacts … on prices, rents and wages in specific locations, and how this could affect the forecast impacts on both productivity and business location.

    Put another way, KPMG seem to be saying that their present guestimates could be wildly inaccurate!

  • @Richard
    Its the same report BBC Newsnight referred to. The data set that Andy refers to above, was passed to BBC Newsnight following an FoI request, hence why it is missing from the report.

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