Question to the Department for Transport:

To ask Her Majesty's Government what is their latest estimate of the improvement in UK productivity that will result from building the HS2 railway.

The Department for Transport published the Phase 1 HS2 business case in April 2020. Paragraph 2.85 and Figure 2.2 of this document set out the breakdown of the total GDP impacts (£82bn at 2015 prices) of the HS2 programme. Whilst total productivity impact has not been formally estimated, the constituent parts of the GDP benefits provide estimated impacts which are important sources of productivity gains.

The £60bn of business user benefits could be translated as direct gains from productivity improvements to business users. Similarly, the impacts from agglomeration (£14bn) due to HS2 captures the impact from improved productivity through urbanisation, and some labour supply impacts (£2bn) through positive labour market dynamics.

HS2 is expected to be transformational, and the wider impacts are likely to be much more significant than currently estimated in the business case. Some of these impacts have been explained in the Strategic Case, regarding skills and employment impacts, innovation and technological changes etc. However, the wider economic impact has not been fully quantified in the economic case.

This lack quantification of important and significant wider benefits was reflected in Conclusion 49 of the Oakervee Review. Also, given that the significance of investments entailing HS2, it will likely have macro-economic impacts on labour and other markets, that may drive up productivity gains. Combining the change to economic geography, dynamic agglomeration and improving access to higher productivity jobs, with the wider macro-economic impacts of the scheme, the productivity impact is likely to be significant.

The Department is working with its arm’s length bodies to develop the evidence on transformational impacts and will aim to incorporate some such evidence, when assured, in future business cases.