Six years have passed since a second high-speed line was proposed to address capacity constraints on the West Coast Mainline. HS2, the £50 billion infrastructure project to build a high-speed rail line from London to Manchester and Leeds, via Birmingham, was initially backed by the Labour Government in 2009 and gained the support of the Coalition Government in 2010.

Supporters of the project argue that it will help ‘rebalance the economy’ by attracting investment to regional cities and creating new jobs. The Government estimates that HS2 itself will create 25,000 jobs during construction.

It has also been argued that HS2 will generate local economic opportunities and development beyond the impacts of this direct expenditure.

HS2 Ltd predicts that additional commercial development brought forward as a result of HS2 in areas immediately surrounding HS2 stations could support up to 100,000 jobs (The strategic case for HS2, 29 Oct 2013).

Criticism

However, the project has also attracted plenty of criticism. Critics of the project argue that it represents poor value for money, draws investment away from other local infrastructure projects and risks turning regional cities into dormitories for London businesses, sucking talent towards the capital and sapping regional cities of their local identity, rather than bridging the north-south divide.

In a report published in March this year, the House of Lords Economic Affairs Committee, stated that they: “Do not believe that the Government has shown that HS2 is the best way of stimulating growth in the country.” Peers questioned whether improving regional links between northern cities might not be a more cost effective way of stimulating growth, and called upon the Government to present better analysis to justify the project.

Jeremy Corbyn’s ascent to the Labour leadership raises other questions. The new Labour leader’s voting record shows no enthusiasm for HS2 and he has openly criticised the project in the past. However, given that his Northern Future policy paper makes no specific reference to HS2, it is possible that Corbyn will adopt the Labour party’s stance on the project which had received wide cross-party support before the election.

The Hybrid Bill

The controversy surrounding the line is reflected in the fact that over 120 amendments have been made to the Hybrid Bill which is currently winding its way through Parliament. The Bill to secure the powers to construct Phase One was tabled in 2013 and is expected to achieve Royal Assent by the end of 2016, after which construction will begin.

In the meantime, HS2 Ltd, the team backed by the Department for Transport developing the service, face three assessment reviews by the Government, the first of which was due to take place this autumn but has been deferred until the New Year.

However, the political will behind the project was made clear over the summer by the new Conservative Government who interpreted its election victory as a ‘vote of confidence’ for HS2.

The recent appointment of Lord Adonis as head of the new National Infrastructure Commission (NIC) is a further sign of the Government’s determination to see the project through. Adonis was the secretary of state for transport who initiated HS2 under the last Labour Government and he is still one of the project’s most staunch supporters.

This paper therefore starts from the proposition that HS2 will happen and focuses primarily on its effects on Birmingham which is the first phase of the project.

Work is expected to start in 2017 on Phase One of HS2 which will run from London to Birmingham and is estimated to be completed by 2026. The second phase, in which the line splits into a V-shape running to Manchester and Leeds, should begin later.

^{Source: Department for Transport}

The impact of HS2

Increased connectivity between places where synergies exist increases the potential for trade. It also allows for a reorganisation of economic activity between places with companies moving or expanding to more efficient locations.

However, good connectivity in itself does not automatically attract investment. Connectivity allows growth where the conditions exist to enable market participants to take up opportunities (Rosewell & Venables, April 2014).

The report argues: “A key question is therefore whether firms and organisations in areas of increased accessibility have growth potential, economies of scale potential and a willingness and ability to invest in these.”

Investment in HS2 must therefore be accompanied by a supportive business environment and structured plan of action if regional cities are to reap the full value of the new line.

As we explore in this document, this is the right time for Birmingham both politically and economically. The recently announced West Midlands devolution deal, includes over £1 billion of Government investment to boost the regional economy. The combined councils will also receive control of £36.5 million a year of funding allocation over 30 years.

This comes at a time when the commercial occupier markets and residential markets are strengthening as economic growth builds momentum and attracts private investment. As a massive national project with a deadline, HS2 throws the region into the limelight and serves to further galvanize development activity.

^{Source: www.gov.uk/hs2, www.nationaltrust.org.uk/article-1356391966618/}