High speed rail and the North-South divide

The national interest?

The government asserts that high speed rail (HSR) is in the national interest. What this means is not entirely clear. Transport Secretary Philip Hammond says the high speed rail network will “change the social and economic geography of Britain; connecting our great population centres and international gateways”.
Hammond further suggests that linking England’s main cities via high speed rail, with further links to Scotland, could help break down the north-south divide. “Bringing those economies in closer reach of London, allowing them to benefit from London’s magnet effect in the world, is going to help solve some of the most intractable postwar social and economic problems Britain has faced.”
This echoes a number of influential public and private voices, especially the pro-HSR group Greengauge 21. They argue that high speed rail will create jobs, improve the competitiveness of regional economies and promote regeneration.

What is the basis for such claims?

Research by KPMG for Greengauge 21suggests HSR could create 25-42,000 new jobs and higher wages with most impact in the North and Midlands, especially in the core cities. The government itself in the High Speed Rail Command Paper said there would be substantial economic benefits to the major city regions of the North and Midlands. This may be influenced by the data from KPMG. Business lobbies in the regions are also quoting that data.
Unfortunately this data appears to be highly unreliable. It projects benefits over very long periods, beyond most reputable economic forecasting horizon. They also run counter to much research, as summarised, for example, in the Eddington Transport Study undertaken for government , in the Leeds University Institute of Transport Studies’ recent review for The Northern Way, or in expert academic evidence to the recent Transport Select Committee hearings. This strongly suggests that:
• There is no firm evidence basis for claims about the potential impact of infrastructural investment on regional economies and regeneration.
• Transport investment on its own is not a sufficient condition for economic development and there are other more cost effective ways of promoting economic development than investing in transport.

Deceiving the regions?

Research also tells us that:

• While the new ‘connectivity’ between cities which High Speed Rail might bring is likely to create little new development, it may have a substantial impact in redistributing existing economic activity and jobs. This is a clear conclusion of the KPMG study for Greengauge 21.
• But this redistributive effect is likely to benefit the biggest and strongest cities and regions most. The biggest beneficiary of HS2 and the wider HSR network is likely to be London and the South East – not the Midlands, North and Scotland.
• Other places which may gain are the nodes around the small number of proposed stations. Thus in the Midlands, Birmingham might benefit, but many other cities, towns and rural areas away from the very few stations could lose out. In the North West, Manchester might see some benefits, but these could be at the expense of the rest of the region.

Thus, some claims for the impact of HSR on jobs and regeneration could possibly mislead many in the regions who so far may have taken them at face value.

National interest or narrow interest?

Claims that HS2 and the wider proposed HSR network are in the national interest appear to be unproven. The beneficiaries could be limited to London and nodes around the very few stations. Another beneficiary would be businesses involved in construction and operation, and in developments around the ‘station nodes’. However this might still exaggerate the benefits of HSR, because other forms of transport investment, could be frozen out by the vast outlay of public investment on High Speed Rail. Such alternative investment could also create jobs and also spread the benefits more widely.

HS2 and High Speed Rail may thus serve only narrow geographical and sectoral interests, and accentuate, not break down, the North-South divide.

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About Mike Geddes

Professor Mike Geddes has research interests in public policy and management, including local democracy, local economic development and public services. He has undertaken research for the EU, the UK government and many local authorities, and has led and participated in several large scale policy evaluations for government. He has contributed regularly to the OECD LEED programme on local governance and the work of the OECD Trento Centre, and is a member of the Commonwealth Local Government Forum Research Advisory Group.
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4 Responses to High speed rail and the North-South divide

  1. Ian Waddell says:

    This is spot on. There is no reputable independent research which backs the case for HS2. My own review of international empirical evidence underlines the fact that real impact of high speed rail is not to create additional business investment but to redistribute it in favour of dominant regions economically and to those few areas lucky enough to be close to a station.

  2. Interesting Mike (and hello by the way – remember me?)

    I have no axe to grind with HS2. I live nowhere near the proposed route(s).

    What concerns me is the apparent reliance on the KPMG economic appraisal. As a sometime economic appraiser myself I know how the process works around using many, many assumptions and ‘what ifs’ in order to project a series of alternative scenarios. One of these will suit the needs of the advocate of the scheme in order to get Governmenmt backing and be seen to meet Treasury ‘Green Book’ rules. The purpose of the research KPMG have carried out is to win the investment. End of.

    You and Ian elucidate my second concern. In layman’s terms if HS2 brings Birmingham closer to London then surely London is closer to Birmingham. I am not clear what analysis KPMG have done on likely in/out flows of business as a result. If as you suggest above more dominant regions prosper it becomes less compelling that West Mids will ‘win’ under HS2.

    …which brings me to the question of ‘who’ will fill the jobs? If many do come to the West Midlands will they be permanent. will they be filled by local people, will there be inbuilt clauses re use of local supply chains and small businesses to be given a fair crack at procurement?

    I am not anti HS2 per se. What does irritate is the polarised debate between ‘business’ which is always pro such developments and I think not always wisely as opposed to the ‘nimbyism’ and environmental standpoints which seem to be the only voices of dissent trundled out by the media. I actually think there are economic arguments against as well as for.

    • Mike Geddes says:

      Rob

      I do indeed remember you! And I fully agree that it’s the economics that’s vital. I don’t know if you’ve heard of the National Convention on HS2 which is being held at the NAC, Stoneleigh, on Saturday? There will be speakers on a wide range of topics, including myself. I will be deconstructing the KPMG/Greengauge 21 figures on the supposed regional benefits of HSR and the alleged ‘transformational’ economic effect of HS2. If you’re interested (or maybe a colleague?), see http://stophs2.org/. Your question about whether jobs will go to local people and businesses is a very good one. So far I have seen nothing about this. I seem to remember there was an attempt to apply local labour/business principles to HS1 in Kent but I don’t know what the result was. If anyone knows anything about this, please reply!

  3. Ian Waddell says:

    The evidence suggests that it is service sector jobs which will benefit from high speed rail, and within this I guess we are mainly talking about business services. So called ‘producer’ services – design, marketing etc.. are increasingly being delivered on-line. London and the South East are so dominant in business services that it is difficult to imagine much benefit flowing the other way. How many London HQs of management consultancies or finance houses will be tempted by HS2 to reduce overheads by closing regional branches? Lastly when we talk about ‘benefits to the West Midlands’ we are of course really talking about benefits to parts of Birminham amnd Solihull close to the proposed stations

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