hs2 logoIt has been hard not to notice that in the UK there has been a lot of talk from the Government recently regarding the railways. Put simply the Government is looking to purchase a new train set, using a credit card.

HS2 and the other permutations from this are all focused on delivering High Speed trains from the major cities in the UK. High Speed apparently is defined as any train that can travel at over 125mph, which actually does mean that our current railways actually do deliver "High Speed" based on the technical definition. The Government believes that by building a new railway infrastructure it will improve the economic benefits for areas outside of London, treble the capacity of the current trains on the network and also speed up the travel times between the major cities.

It all sounds very promising when you think of it like that. If getting from Manchester to London will now go from 127mins to 67mins then that has to be a positive. There is the claim that these trains will travel at up to 250mph and the fares will be "online" with those that are currently paid on the railways. However critics are starting to question this already based on the basic business principles of finance.

Building a new railway isn't cheap. In fact HS2 is estimated to cost in total somewhere near the £65bn mark. This is a budget that has already been revised upwards. Also remember that the Government is dependent on borrowing to finance its projects, so basically the Government is talking out a loan to pay for this investment which will mean that interest charges should be factored into the overall cost of the project.

There are also concerns over the amount how smoothly will the plans run? If the project was to hit delays from external factors and influences then costs could quickly increase. There are also question marks over the operating costs of the project and the real Return on Investment that the project will yield. The critics point to the fact that all the calculations have been performed based on the assumption that energy prices will only inflate until 2035 an then after this will remain constant. This does appear to be a strange logic that is being adopted here.

What is most interesting from my personal point of view is the arguments that the HS2 project is going to bring about shared economic benefits. I am a little lost to work out how some of these have been calculated? For example HS2 is passing through many areas and simply not stopping. It will either be cutting through someone business or home, actually creating more uncertainty and disruption in a local community. We all know that markets hate uncertainty, so why should this have any less adverse impact on the local economies that make up the UK?

Say your lucky enough to get an HS2 station in your town. Does this actually provide economic benefits? The argument is that it will mean that people can commute easier and makes connections for business more simple. However, we do live in a global digital world these days, where web conferencing and online communication is not only more instant but also more cost effective for organisations to communicate over distances. Only at the weekend I was talking to someone who works for a large employer in the Crewe area, who has set about this policy to reduce travel and costs. Why is Crewe symbolic, because this is one of the towns that is having an HS2 station, however this will be in the current station which could already suggest that cost cutting is taking place.

Also in these areas it is believed that the increase in commuters who will live close to these stations, will increase housing demand and naturally prices will start to increase. However what will be the impact on local first time buyers? Will they now be forced out of living in the communities that they have grown up in? Also the increase in demand for housing will push up the value of land which could actually hinder industry setting up in the local area as they will look to other areas with "less prime" real estate. It could also force existing industry out of an area as they look to cash in on the value of their fixed assets and release the capital in these for housing. Hence all of this is actually driving employment out of a local area. The development of commuter towns may sound fine on the face of it, however what happens to the local economy when most of the residents are actually using areas as effective bed and breakfasts and spending most of the time and wealth outside of the local area.

Of course these are just thoughts and I'm sure someone is undertaking studies into these factors. The problem is that these are not easy factors to measure. The people I know who live close to the town of Crewe are actually not excited because they have a quicker train to London, just because of the impact they are expecting it to have on their house prices. This is starting to be shown in local property auction as estate agents are keen to use the HS2 carrot as an external factor to drive up prices and their profits. However what impact and affect will all of this have on the local community and business economy of Crewe?

Move along the road to Stoke and its a different picture. They wanted an HS2 station and it could be argued that the council wasted millions trying to bid against Crewe to try and obtain one. Remember the Government talks about economic benefits for all from HS2. Well tell that to the people of Stoke. The plans that were announced yesterday seem to imply that the current number of trains from Stoke to London will actually be cut as a result of HS2. So if these connections of the large cities are so important, why on earth is cutting connections from other cities going to help benefit the economic area? Using the Government's own logical it simply won't and will just bring about more stagnation of some of the old Northern industrial cities, who for years believe they have been neglected.

So when people talk about HS2 and its economic benefits I am a firm believer that we have to look deeper and more critically to these claims. Something doesn't add up as if building a new railway was the answer to all the economic problems, why isn't the whole world setting about this strategy. Yes we have a current system that is old and dated, compared some others in the world. However this is where investment comes in. We have allowed the current network to become a "cash cow" and any improvements that have carried out have not always been the "best option", more like the cheaper option.

Is a new train set going to bring about economic success for the UK? I have my doubts. Yes there are benefits, however I suspect that many of the regional factors that I have highlighted I suspect will soon start to become evident. This will sadly be something that will only filter into the local economies many years down the line and long after these politicians in Government are long gone.


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