London CNN —
UK Prime Minister Rishi Sunak has taken the axe to Britain’s biggest current infrastructure project, despite warnings from business leaders that the U-turn will damage investor confidence in the country.
Sunak announced plans Wednesday to curtail High Speed Rail 2, known as HS2, the government’s flagship transport project intended to boost railway capacity and cut journey times between London, Birmingham and Manchester — England’s three largest cities.
The government will now cancel the remainder of the project, scrapping the Birmingham-to-Manchester high-speed line and dashing hopes that it would deliver badly needed investment to less affluent parts of the United Kingdom.
The money saved will instead be reinvested into “hundreds” of new transport projects in the English midlands and the north of the UK, Sunak said at the Conservative Party Conference in Manchester in the north of England.
“This means £36 billion of investment in the projects that will make a real difference across our nation,” he added. “Our plan will drive far more growth and opportunity here in the north than a faster train to London ever would.”
Sunak said the economic case for HS2 — a project 14 years in the making, plagued by repeated delays and cost overruns — had been “massively weakened” as a result of changes to business travel following the pandemic.
But business and political leaders, including members of the ruling Conservative Party, have strongly criticized the decision — leaked before Wednesday’s official announcement — as the latest example of confusing policymaking by the UK government.
Andy Street, the Conservative mayor of Birmingham, said the about-face “damages” Britain’s international reputation and that as a “serious G7 country” the UK had to be able to deliver on “difficult” infrastructure projects.
Investors had already committed “hundreds of millions, if not billions, of pounds” on the “promise” of HS2, he said in an interview with radio station LBC this week. “You cannot then turn around to those investors and say, ‘We’ve changed our mind.’”
One such investor is Tom Wagner, co-chairman of US private equity firm Knighthead Capital Management, which bought the Birmingham City football club earlier this year.
In a letter to Sunak published late last month, Wagner, now chairman of the club, said the improved connectivity with the rest of the UK that HS2 would bring was a “key” factor in Knighthead’s decision to invest in the club.
“The expectation is that the government will honor its commitment to deliver on publicly stated long-term plans,” he wrote. “Any deviation could result in a loss of investor trust, and this would have a considerable negative impact on the UK. The ambitious HS2 project falls into this category.”
The U-turn was also blasted by Richard Walker, the boss of supermarket chain Iceland, and until recently a long-time Conservative Party member.
The government’s “evident inability” to deliver on major projects “is devastating to both its credibility and to business confidence,” Walker wrote in The Guardian newspaper Sunday.
“UK plc is crying out for both stability and certainty — and the current government’s constant changes of direction and failures to make decisions are actively undermining this.”
Walker added that he had canceled his membership of the Conservative Party.
— This is a developing story and will be updated.