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Earlier this week, the Department of Transport’s permanent secretary warned that rapidly rising prices of construction materials were putting a strain on capital spending, and could mean “quite tough decisions” on the phasing and delivery of projects, including HS2.
Bernadette Kelly told the House of Commons transport select committee that ministers would be taking decisions “over the next few weeks” on how the pressures would be managed. She told MPs:
It is likely that there will be some quite tough decisions that need to be taken then, including around the phasing and delivery of all our capital programmes, including HS2.
Asked about company executives playing golf on Fridays and joking about only working Tuesday, Wednesday and Thursday, and the impact on Britain’s economic growth, the CBI boss, Tony Danker, said:
You want me to launch an all out attack on Friday golfers?
Look. Yeah, you might be right. I think the whole world of work is totally gone crazy. We have no idea where it’s going to land.
CBI head: Most bosses ‘secretly’ want staff to return to office
The head of Britain’s biggest business group claims most bosses “secretly” want their staff to come back to the office.
Tony Danker, director general of the CBI, said the “whole world of work” had “gone crazy” since the pandemic. During lockdowns, office workers were forced to work from home, and since restrictions eased, many have continued to work at least partly from home.
Many companies have changed their policies on remote working, allowing hybrid working, although in recent months some have asked staff to return to the office. For example, Disney’s boss Bob Iger has told employees who are working from home to return to the office four days a week from the start of March. Other US businesses – Snap, Tesla and Goldman Sachs – have also asked their staff to come back to the office
Speaking on BBC radio 4’s Political Thinking with Nick Robinson, the boss of the CBI said he had “no idea” where working patterns were “going to land”.
You ask most bosses, everybody secretly wants everyone to come back into the office.
I just don’t think that’s going to happen overnight. I think we are all coping with this….but we’re going to be talking about this for a few years.
According to the Office for National Statistics, the number of people who are economically inactive – people aged between 16 and 64 not looking for work – has risen.
The House of Lords’ economic affairs committee said retirement, increased sickness, changes to migration and the UK’s aging population were contributing to labour shortages.
Danker said he wanted to create “pathways” for people to return to work for those who were on universal credit, or had been unable to work due to sickness.
We are going to work with companies to make sure that they can bring you health support and wraparound care to absorb yourself back into work.
Henry Murison, chief executive of the Northern Powerhouse partnership which supports HS2, said about the reports:
It’s very disappointing and I don’t think it should reflect the government’s settled view.
We’ve already had in the Boris Johnson era on bad advice from a small number of advisers close to him unfortunately the lopping off of places like Leeds where I’m stood right now.
Every time this happens, every time the opponents find an excuse to lop bits off HS2, they turn around and say this project isn’t value for money. Every time we take away from the network we make the rest of the money we’re spending less worth it.
Speaking on the Today programme, he said not running HS2 through to central London would be “damaging to the north of England as well as London” and affect UK productivity. He suggested other ways to save money, by leasing the HS2 trains, instead of buying them.
I believe Manchester will still get its line but I’m interested in what’s right for the whole of the UK. Even for the north of England, not going to Euston has a number of significant disadvantages. Because people in the north of England, people in Birmingham, will want to get access to central London, that’s what they currently have through the normal mainland network… You do need these stations to be centrally located.
The intellectual argument, and the economic argument is that we need to raise UK productivity, it’s terribly low and that’s why I don’t believe this is ever going to happen. Jeremy Hunt is a huge supporter of HS2 and there are other ways to save the money.
For example we’re buying the trains for HS2, we lease every other train in the country, for every other route, why on earth are we having to report a cost for buying trains? No other rail project has to do that. There are ways to deal with the current inflationary pressures.
It’s incredibly short term to take a project over decades and rip it apart to solve an accounting problem.
In the end the benefits of this to UK plc will still far outweigh the costs but if we keep salami slicing it fundamentally we will not get anywhere the transformational change that the whole of the UK was promised.
Great @MrHarryCole Sun story about HS2 rethink.
Watch what happened when I tried to get Rishi Sunak to commit to current HS2 plans last week….
(NB later that day he didn’t engage with the q a second time too) https://t.co/KHvKajkwFv
— Sam Coates Sky (@SamCoatesSky) January 27, 2023
Lord Berkeley, who has been very critical of HS2 and was deputy head of a government review into the project, has been on radio 4’s Today programme. Asked about the reports that the central London terminus at Euston could be scrapped, he said:
They are to a large extent true because the budget for the whole project is now over £160bn and you get inflation pressures.
But what they are not spending the money on is getting improved rail services east to west, between Liverpool and Manchester, Leeds and other places, and across from Birmingham to Derby.
The money would be much better spent for people to get local and regional services much more efficiently comfortably and move people onto rail.
Do we really need everybody to get to London that much quicker when there are some pretty good services at the moment?
He said “probably £10bn has been spent so far” and the rest of the budget could be redirected to improve other rail services.
We should aim for the regions, the north and Midlands, to have a commuter service that’s as good as in the south east.
Introduction: UK’s flagship rail project HS2 may not run to central London
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The UK government has refused to confirm that its flagship rail project HS2 (High Speed 2) will reach central London following reports.
The Sun reported that because of rising construction prices, the high speed rail project may not run to Euston until 2038 – or the terminus may be scrapped completely, with trains instead stopping at a new hub at Old Oak Common to the west of London, about 8km (five miles) away.
Commuters would have to use the new Elizabeth line to get into central London.
A Department for Transport spokesman said:
The government remains committed to delivering HS2 to Manchester, as confirmed in the autumn statement.
As well as supporting tens of thousands of jobs, the project will connect regions across the UK, improve capacity on our railways and provide a greener option of travel.
The Sun also reported that a two-to-five-year delay to the entire HS2 project is being considered, with fresh fears that the Birmingham to Crewe and Manchester legs could also be scrapped. HS2 was intended to connect London with Birmingham, Manchester and Leeds, but the leg to Leeds has been scrapped.
Work on the first phase of the project, between London and Birmingham, is well under way and that part is scheduled to open by 2033.
The project has been dogged by criticism over its cost and environmental impact.
In October, the levelling up secretary Michael Gove suggested capital investment for HS2 would be reviewed, but chancellor Jeremy Hunt subsequently backed the project.
The target cost of phase one between London and Birmingham was £40.3bn at 2019 prices, but the Sun said that first phase alone could cost £60bn. A budget of £55.7bn for the whole HS2 project was set in 2015.
US stocks rallied yesterday after better-than-expected economic data, with the Nasdaq gaining 2% and the S&P 500 up 1.1%. Asian shares have hit near-nine-month highs as recession fears faded, in their fifth week of gains. MSCI’s broadest index of Asia Pacific shares outside Japan rose 1.14% to 559.01.
Investors were encouraged by news yesterday that the US economy grew faster than expected in the fourth quarter, although it could be the last quarter of solid GDP growth before the effects of the Federal Reserve’s rate hikes are fully felt. Some economists still expect a “mild recession” in the coming months.
The Fed is expected to raise rates by 25 basis points to 4.75% next Wednesday, which would be a smaller hike than previous moves. Markets see the Fed’s main rate at 4.45% next December lower than the 5.1% Fed officials have projected into next year. Today, data on US personal consumption expenditure (PCE) could provide further clues on inflation.
In Japan, core consumer prices in Tokyo, a leading indicator of national trends, rose 4.3% in January. from a year earlier, marking the fastest annual rate in nearly 42 years. If replicated nationwide, this could force the Bank of Japan to abandon its ultra-easy monetary policy.
The Agenda
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8am GMT: Spain GDP for fourth quarter flash (forecast: 0.1%)
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10.30am GMT: European Central Bank president Christine Lagarde speaks
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1.30pm GMT: US Core PCE Price index for December (forecast: 4.4%, previous: 4.7%)
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3pm GMT: US Michigan consumer sentiment for January (forecast: 64.6)
