The National Audit Office (NAO) has released a report examining the HS2 reset and putting a time limit on contract renegotiation
The NAO HS2 report shows now that a full cancellation of HS2 would cost nearly as much as finishing it, which has improved the benefit-cost ratio of the project.
As such, the NAO is warning that the process of resetting the project must get it right this time, and save costs wherever possible.
Cancellation costs have quadrupled since 2023
Now that the cost of cancellation is comparable to the cost of finishing the project, the NAO reasons that now the project should be finished to salvage value.
The other opportunities that the project will bring is also an argument for finishing HS2, including a £10bn economic uplift, 30,000 new jobs, and 41,000 new homes over the next ten years in the West Midlands, and 18,000 jobs and 22,000 new homes around Old Oak Common in London.
To continue salvaging value, HS2 has also been overhauling commercial contracts since April 2025, aiming to save roughly £2bn and improve the certainty of both costs and programme delivery. Many of these have not yet been fully renegotiated. It is hoped that these contracts will be renegotiated by the end of Autumn, but the report states that the window to make savings from this is narrowing. A contract for the Interchange Station has not yet been agreed in terms of price, delaying the start of that part of the project
Further in line with cutting costs, the NAO’s audits of the program have identified £500m in disallowable contractor costs that are either outside of contractual scope or are unsupported by records.
Reasons for severely inflated costs include the costs to build HS2’s stations have doubled since 2020, as Curzon Street grew from £0.6bn to £1.3bn, and Old Oak Common ballooning from £2bn to £4.3bn, due to design issues, underestimation of project complexity, site constraints, and repeated replanning.
“The government must prove it has finally gripped this programme”
Aside from this, the review found that there are too many staff in central functions and too few on front-line delivery, weaknesses in both commercial and contract management, and gaps in systems integration expertise.
Sir Geoffrey Clifton-Brown, the chair of the Committee of Public Accounts, said: “Today’s report confirms that HS2 will arrive years later, cost vastly more – up to £102.7bn – and deliver less than originally planned.
“While governance is improving and HS2’s designation as a mega-project has introduced more streamlined decision-making, more work is needed to complete the reset and restore confidence. The government must prove it has finally gripped this programme and begin to rebuild public trust in a project whose reputation has been severely damaged by a litany of failures, so that it can start delivering long-promised benefits.
“The works at Euston present an opportunity to regain reputation, not only by integrating HS2 with a central London terminal, but also by driving regeneration and bringing huge benefits to the local area.”
The NAO’s report on the HS2 reset can be read in full here.
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