How will high speed rail impact on the West Midlands economy?

High speed rail (HSR) and specifically the current government proposal for an initial line running from London to Birmingham and Staffordshire (HS2) will, so it is claimed, have a major impact on the economy of the West Midlands.

The Chancellor George Osborne has stated that around 8,000 jobs will be created in and around Birmingham. A study carried out for CENTRO, the West Midlands Passenger Transport Authority, claims that HS2 and supporting investments will create up to 22,000 new jobs.

How realistic are these estimates?

How would any benefits be likely to be distributed across the region? And how would this influence existing patterns of economic investment and employment?

The following analysis is based upon a study of the body of independent research on the wider economic impacts of High Speed Rail (HSR), based on experience in Europe and elsewhere.

A good starting point for considering these issues is the understanding that, unlike UK motorways, HS2 will have a very limited number of stations. Therefore it will not promote a ‘growth corridor’, but rather separate growth ‘nodes’ based around the stations. In the East and West Midlands regions there are currently just three projected stations in total – at Curzon Street in Birmingham and approximately half a mile to the east of the existing Birmingham International Station, and a further station serving the East Midlands which, speculatively, may be located somewhere in the proximity of East Midlands Airport.

The theory is that economic activities located at or near these nodes derive economic benefits as a result of improved ‘business connectivity’ resulting from shorter journey times, together with what is called the ‘agglomeration’ effect. These are efficiencies resulting from geographical proximity of firms to each other, labour market effects, network economies and environmental externalities.

However, the economic benefit ‘spillover’ effects from growth nodes into their wider ‘hinterland’ is very significantly constrained by the quality of the local transport system. Significant economic benefit only occurs when high speed rail (HSR) investment is accompanied by major investments in local infrastructure. There is no indication that this is likely to be the case with HS2.

Indeed, many rail passengers may be required to change stations and trains in order to access Birmingham City Centre, thus negating time saved through HSR. Car users will need to drive to and from the new stations, many of them utilising a Midlands motorway system already subject to major congestion problems.

Moreover, the danger is that economic growth becomes focussed on these two nodes at the expense of economic activity elsewhere in the region. Businesses will relocate from more peripheral areas or establish themselves at the node as a first preference. Serious concerns about HS2 currently being expressed by organisations such as Coventry and Warwickshire Chamber of Commerce and Coventry City Council becauseCoventry is effectively ‘by-passed’ by current proposals and the quantity and quality of its existing rail services are threatened. We can foresee further disinvestment in similar rail connections in locations ‘peripheral’ to HSR.

Finally, there is a strong research consensus that the South East Region would be the key beneficiary of a UK high speed network.

Current claims for numbers of jobs created in the West Midlands as a result of HSR could be considered exaggerations, as they fail to take into account the numbers of jobs that will be lost to the South East and as a result of the disinvestment in local transport networks that will occur as a consequence. CENTRO’s estimate of 22,000 new jobs is based upon the assumption of a major upgrading of local transport services alongside investment in HS2, when in fact the reverse is happening. Even if George Osborne’s estimate of 8000 new jobs is accepted, this works out at over £2M per job based on the £17bn cost of HS2. In contrast, the Government’s own value for money guidelines on job creation quote a figure of £27,500 per job.

To sum up, as far as the West Midland region is concerned, the evidence strongly suggests that:

(i) HS2 will lose the region vital service employment to London and the South East
(ii) indigenous economic growth will be attracted to areas in the vicinity of the two new Birmingham stations, at the expense of many important centres, including Coventry, the Black Country, Stoke on Trent, Telford and Shrewsbury , as well as many smaller towns and rural areas.
(iii) locations such as these will also see their economic competitiveness worsened as a result of further deteriorations in local rail services.

Ian Waddell MRTPI (Rtd.)


About Ian Waddell

IAN WADDELL (R.T.P.I. Rtd) is an urban regeneration, economic development and transport Consultant. His career has spanned both public and private sectors and encompasses research, policy development, implementation and evaluation in every aspect of regeneration. He has taken a leading role in regional economic research, and has undertaken a series of major studies of aspects of public transport provision in the West Midlands.
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One Response to How will high speed rail impact on the West Midlands economy?

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