Connect with us

Published

on

The government has announced the construction of sections of HS2 will be delayed by two years to save money.

The high-speed railway was initially set to link London and the West Midlands with a further phase extending to cities in the North.

However, Transport Secretary Mark Harper said on Thursday: “We have seen significant inflationary pressure and increased project costs, and so we will rephase construction by two years, with an aim to deliver high-speed services to Crewe and the North West as soon as possible after accounting for the delay in construction.”

The delay will affect the northwest section of HS2, from Birmingham to Crewe, and then from Crewe to Manchester.

In a written ministerial statement, Mr Harper said the government is “prioritising HS2’s initial services” between Old Oak Common in west London and Birmingham Curzon Street.

Hs2 map
Image:
The delay will affect the northwest section of HS2, from Birmingham to Crewe, and then from Crewe to Manchester.


On delivering services to central London, he also hinted at delays, saying: “We will address affordability pressures to ensure the overall spending profile is manageable.

“We will therefore take the time to ensure we have an affordable and deliverable station design, delivering Euston alongside high-speed infrastructure to Manchester.”

A planned extension to Leeds was already shelved in November 2021.

Labour said the latest delay meant the North was again having to “pay the price” for government failures.

Louise Haigh, the shadow transport secretary, said: “Tens of thousands of jobs, and billions in economic growth are dependent on this project.

“The North is yet again being asked to pay the price for staggering Conservative failure.

“Conservative chaos and chronic indecision is holding back jobs, growth and costing the taxpayer.

“This is the biggest project in Europe and delays pile costs up in the long run – ministers now need to come clean on precisely how much their indecision will cost taxpayers and the North.”

Raising a point of order in the Commons, Labour MP Sarah Owen also attacked Mr Harper for “avoiding scrutiny”.

She said the cabinet minister “should have had the decency to come to this House and explain to members why they are doing this” instead of publishing a written statement “at nearly 5 o’clock on Thursday afternoon”.

Commons speaker Lindsay Hoyle also criticised the way the delay was communicated, with his spokesperson saying: “The Speaker has consistently told the government that major policy announcements should be made to the House first so that members have the chance to ask questions on behalf of their constituents, rather than hearing about them via the media.”

Delay ‘could lead to higher costs’

Delivery of the high-speed railway has been a core pledge of the Conservative government but it has been plagued by delays and ever-increasing costs – from estimates of about £33 billion in 2010 to £55.7bn for the whole project in 2015.

By 2019, the estimated cost had soared to at least £71bn, excluding the final eastern leg from the West Midlands to the East Midlands.

Ministers are understood to be delaying construction of the northern section in the hope they can spread the cost over a longer period of time so it was more affordable annually.

Chancellor Jeremy Hunt is set to announce his spring budget next week and will have Rishi Sunak’s target in mind – to get government debt to fall as a percentage of GDP within five years.

HS2 :'Just give us the facts' Transport Secretary
Image:
The high-speed trains were set to go from London Euston to Birmingham and up to Crewe and Manchester

However, the Confederation of British Industry (CBI) said the delay would hit confidence in the rail industry and could ultimately lead to higher overall costs for HS2.

John Foster, the CBI’s policy unit programme director, said the news “will ultimately reduce investor and contractor confidence in the rail sector”.

“To mitigate further loss of confidence, it is critical that government tackles the inflationary pressures which are biting hard across the infrastructure sector,” he said.

“Delays to projects may create short-term savings, but they can ultimately lead to higher overall costs and slow down the UK’s transition to a better, faster and greener transport network.”

HS2 a ‘colossal mistake’

Leader of Birmingham City Council, Ian Ward, said the delay is “another betrayal of the Midlands and the North, making a mockery of the government’s empty promises to level up the UK economy”.

But Conservative MP and former chief secretary to the Treasury Simon Clarke said delaying construction “would be a sensible decision”.

“Having observed HS2’s progress as chief secretary, I have serious doubts as to value for money and cost control,” he said.

Greg Smith, the Conservative MP for Buckingham, called for the government to “accept the whole thing was a colossal mistake and scrap it, all of it”.

Just last week, rail minister Huw Merriman told the Commons the government is “absolutely committed” to delivering HS2 but admitted “cost pressures” must be examined.

HS2 Ltd chief executive Mark Thurston said the project had suffered a “significant” impact from increased costs in building materials, fuel and energy due to high inflation.

Please use Chrome browser for a more accessible video player

HS2 unearths unexpected treasure

HS2 is Britain’s biggest infrastructure project and has had support from governments of all stripes since it was first mooted more than a decade ago.

But last month, the government reportedly planned to make drastic changes that would almost halve the number of high-speed trains per hour and services would travel slower to save money.

Handout photo dated August 2022 issued by HS2 of a aerial view of the HS2 Euston station construction site in London.
Image:
Aerial view of the HS2 Euston station construction site in London

The Department for Transport (DfT) said at the time it “does not comment on speculation” and said the government “remain committed to delivering the project”.

In January, Chancellor Jeremy Hunt said he did not see “any conceivable circumstance” in which the original plan would not be followed after reports the high-speed line could stop before reaching central London.

There were claims the last leg of HS2 into Euston could be scrapped and replaced with a new hub at Old Oak Common in the suburbs of northwest London, where it is set to stop before travelling into Euston.

The government did not deny the reports or that a two to five-year delay to the entire project – currently due to be completed between 2029 and 2033 – was being considered due to record high inflation impacting costs.

Continue Reading

Business

Chair candidates battle to check in at Premier Inn-owner Whitbread

Published

on

By

Chair candidates battle to check in at Premier Inn-owner Whitbread

Two chairs of FTSE-100 companies are vying to succeed Adam Crozier at the top of Whitbread, the London-listed group behind the Premier Inn hotel chain.

Sky News has learnt that Christine Hodgson, who chairs water company Severn Trent, and Andrew Martin, chair of the testing and inspection group Intertek, are the leading contenders for the Whitbread job.

Mr Crozier, who has chaired the leisure group since 2018, is expected to step down later this year.

The search, which has been taking place for several months, is expected to conclude in the coming weeks, according to one City source.

Ms Hodgson has some experience of the leisure industry, having served on the board of Ladbrokes Coral Group until 2017, while Mr Martin was a senior executive at the contract caterer Compass Group and finance chief at the travel agent First Choice Holidays.

Under Mr Crozier’s stewardship, Whitbread has been radically reshaped, selling its Costa Coffee subsidiary to The Coca-Cola Company in 2019 for nearly £4bn.

The company has also seen off an activist campaign spearheaded by Elliott Advisers, while Mr Crozier orchestrated the appointment of Dominic Paul, its chief executive, following Alison Brittain’s retirement.

More from Money

It said last year that it sees potential to grow the network from 86,000 UK bedrooms to 125,000 over the next decade or so.

Mr Crozier is one of Britain’s most seasoned boardroom figures, and now chairs BT Group and Kantar, the market research and data business backed by Bain Capital and WPP Group.

He previously ran the Football Association, ITV and – in between – Royal Mail Group.

On Friday, shares in Whitbread closed at £25.41, giving the company a market capitalisation of about £4.5bn.

Whitbread declined to comment this weekend.

Continue Reading

Business

Bank chiefs to Reeves: Ditch ring-fencing to boost UK economy

Published

on

By

Bank chiefs to Reeves: Ditch ring-fencing to boost UK economy

The bosses of four of Britain’s biggest banks are secretly urging the chancellor to ditch the most significant regulatory change imposed after the 2008 financial crisis, warning her its continued imposition is inhibiting UK economic growth.

Sky News has obtained an explosive letter sent this week by the chief executives of HSBC Holdings, Lloyds Banking Group, NatWest Group and Santander UK in which they argue that bank ring-fencing “is not only a drag on banks’ ability to support business and the economy, but is now redundant”.

The CEOs’ letter represents an unprecedented intervention by most of the UK’s major lenders to abolish a reform which cost them billions of pounds to implement and which was designed to make the banking system safer by separating groups’ high street retail operations from their riskier wholesale and investment banking activities.

Their request to Rachel Reeves, the chancellor, to abandon ring-fencing 15 years after it was conceived will be seen as a direct challenge to the government to take drastic action to support the economy during a period when it is forcing economic regulators to scrap red tape.

It will, however, ignite controversy among those who believe that ditching the UK’s most radical post-crisis reform risks exacerbating the consequences of any future banking industry meltdown.

In their letter to the chancellor, the quartet of bank chiefs told Ms Reeves that: “With global economic headwinds, it is crucial that, in support of its Industrial Strategy, the government’s Financial Services Growth and Competitiveness Strategy removes unnecessary constraints on the ability of UK banks to support businesses across the economy and sends the clearest possible signal to investors in the UK of your commitment to reform.

“While we welcomed the recent technical adjustments to the ring-fencing regime, we believe it is now imperative to go further.

More on Electoral Dysfunction

“Removing the ring-fencing regime is, we believe, among the most significant steps the government could take to ensure the prudential framework maximises the banking sector’s ability to support UK businesses and promote economic growth.”

Work on the letter is said to have been led by HSBC, whose new chief executive, Georges Elhedery, is among the signatories.

His counterparts at Lloyds, Charlie Nunn; NatWest’s Paul Thwaite; and Mike Regnier, who runs Santander UK, also signed it.

While Mr Thwaite in particular has been public in questioning the continued need for ring-fencing, the letter – sent on Tuesday – is the first time that such a collective argument has been put so forcefully.

The only notable absentee from the signatories is CS Venkatakrishnan, the Barclays chief executive, although he has publicly said in the past that ring-fencing is not a major financial headache for his bank.

Other industry executives have expressed scepticism about that stance given that ring-fencing’s origination was largely viewed as being an attempt to solve the conundrum posed by Barclays’ vast investment banking operations.

The introduction of ring-fencing forced UK-based lenders with a deposit base of at least £25bn to segregate their retail and investment banking arms, supposedly making them easier to manage in the event that one part of the business faced insolvency.

Banks spent billions of pounds designing and setting up their ring-fenced entities, with separate boards of directors appointed to each division.

More recently, the Treasury has moved to increase the deposit threshold from £25bn to £35bn, amid pressure from a number of faster-growing banks.

Sam Woods, the current chief executive of the main banking regulator, the Prudential Regulation Authority, was involved in formulating proposals published by the Sir John Vickers-led Independent Commission on Banking in 2011.

Legislation to establish ring-fencing was passed in the Financial Services Reform (Banking) Act 2013, and the regime came into effect in 2019.

In addition to ring-fencing, banks were forced to substantially increase the amount and quality of capital they held as a risk buffer, while they were also instructed to create so-called ‘living wills’ in the event that they ran into financial trouble.

The chancellor has repeatedly spoken of the need to regulate for growth rather than risk – a phrase the four banks hope will now persuade her to abandon ring-fencing.

Britain is the only major economy to have adopted such an approach to regulating its banking industry – a fact which the four bank chiefs say is now undermining UK competitiveness.

“Ring-fencing imposes significant and often overlooked costs on businesses, including SMEs, by exposing them to banking constraints not experienced by their international competitors, making it harder for them to scale and compete,” the letter said.

“Lending decisions and pricing are distorted as the considerable liquidity trapped inside the ring-fence can only be used for limited purposes.

“Corporate customers whose financial needs become more complex as they grow larger, more sophisticated, or engage in international trade, are adversely affected given the limits on services ring-fenced banks can provide.

“Removing ring-fencing would eliminate these cliff-edge effects and allow firms to obtain the full suite of products and services from a single bank, reducing administrative costs”.

In recent months, doubts have resurfaced about the commitment of Spanish banking giant Santander to its UK operations amid complaints about the costs of regulation and supervision.

The UK’s fifth-largest high street lender held tentative conversations about a sale to either Barclays or NatWest, although they did not progress to a formal stage.

HSBC, meanwhile, is particularly restless about the impact of ring-fencing on its business, given its sprawling international footprint.

“There has been a material decline in UK wholesale banking since ring-fencing was introduced, to the detriment of British businesses and the perception of the UK as an internationally orientated economy with a global financial centre,” the letter said.

“The regime causes capital inefficiencies and traps liquidity, preventing it from being deployed efficiently across Group entities.”

The four bosses called on Ms Reeves to use this summer’s Mansion House dinner – the City’s annual set-piece event – to deliver “a clear statement of intent…to abolish ring-fencing during this Parliament”.

Doing so, they argued, would “demonstrate the government’s determination to do what it takes to promote growth and send the strongest possible signal to investors of your commitment to the City and to strengthen the UK’s position as a leading international financial centre”.

Continue Reading

Business

Post Office to unveil £1.75bn banking deal with big British lenders

Published

on

By

Post Office to unveil £1.75bn banking deal with big British lenders

The Post Office will next week unveil a £1.75bn deal with dozens of banks which will allow their customers to continue using Britain’s biggest retail network.

Sky News has learnt the next Post Office banking framework will be launched next Wednesday, with an agreement that will deliver an additional £500m to the government-owned company.

Banking industry sources said on Friday the deal would be worth roughly £350m annually to the Post Office – an uplift from the existing £250m-a-year deal, which expires at the end of the year.

Money latest: ’14 million Britons on course for parking fine this year’

The sources added that in return for the additional payments, the Post Office would make a range of commitments to improving the service it provides to banks’ customers who use its branches.

Banks which participate in the arrangements include Barclays, HSBC, Lloyds Banking Group, NatWest Group and Santander UK.

Under the Banking Framework Agreement, the 30 banks and mutuals’ customers can access the Post Office’s 11,500 branches for a range of services, including depositing and withdrawing cash.

More on Post Office Scandal

The service is particularly valuable to those who still rely on physical cash after a decade in which well over 6,000 bank branches have been closed across Britain.

In 2023, more than £10bn worth of cash was withdrawn over the counter and £29bn in cash was deposited over the counter, the Post Office said last year.

Read more from Sky News:
Water regulation slammed by spending watchdog
Rate cut speculation lights up as economic outlook darkens

A new, longer-term deal with the banks comes at a critical time for the Post Office, which is trying to secure government funding to bolster the pay of thousands of sub-postmasters.

Reliant on an annual government subsidy, the reputation of the network’s previous management team was left in tatters by the Horizon IT scandal and the wrongful conviction of hundreds of sub-postmasters.

A Post Office spokesperson declined to comment ahead of next week’s announcement.

Continue Reading

Trending