High Speed Two: what’s in it for cities?

Originally posted March 2010, updates Jan 2012 and Jan 2013.

It won’t be here for another 15 years, but HS2 has triggered a mass outbreak of trainspottery enthusiasm. The Guardian even live-blogged Andrew Adonis and Sadiq Khan’s announcements, for goodness’ sake.   The big issues last week were route, timing and cost – so I want to focus on impacts, particularly for cities. I’m not sure these will be all they’re cracked to be.

Dermot has helpfully summarised HS2 and the Conservatives’ plans, and R&R round up the reaction here. It’s all fairly positive (although the headline numbers don’t add up – £30bn over 20 years is £1.5bn per year, not the £2bn quoted by DfT). All the positivity explains why the Conservatives feel they need separate proposals – more on those later.

Let’s take environmental impacts first. HS2 is being pushed as green infrastructure. But as Henry points out, the CO2 impact of the line isn’t at all clear: it could take reduce emissions by -0.41m tonnes, or raise them by about the same amount. This is a pretty small fraction of total UK emissions, and doesn’t seem to significantly change the overall cost-benefit ratio. However, the lack of certainty is a worry – and dents the line’s green image.

There’s more detail on the economic impacts (summarised above). The bulk of the benefits accrue to individual travellers and firms via time savings, which feed into productivity gains at the national level. Time savings also help increase competition between firms.  Labour market impacts are much smaller – it’s unlikely HS2 will dramatically change commuting patterns, for example.

In theory transport improvements boost urban agglomeration – and thus productivity – by improving linkages between firms, and between firms and workers. By bringing agents closer together, we improve cities’ ‘effective density’. HS2 modelling suggests that for North-South high speed rail, these impacts are pretty small – £3.6bn over 60 years, just over 10% of the overall benefits of the line.

This is partly because HS2 doesn’t connect anywhere that’s not already on the rail network. By contrast, SERC’s research suggests that plugging new cities into high-speed infrastructure delivers a bigger charge to output.

So what does HS2 mean for cities? Urban firms and travellers are the big winners, which is good news for cities if more productive businesses raise wages or employment. Some cities get the kudos of being on the line, and may get a regeneration boost from new stations – although that could turn into a windfall gain for developers. But fairly few firms will relocate, and agglomeration impacts will be pretty small.

On this basis, HS2 isn’t likely to fundamentally change the UK’s economic geography. Rather, it will speed up the economic geography we already have.

Two final points. First, for Northern cities, the big agglomeration gains will come from speeding up links into urban cores, or bntter connections between nearby cities like Manchester and Leeds. This is the message of the Eddington Report, and it’s important it doesn’t get lost.

Second, the final shape of HS2 may look quite different. Last week’s report also did some preliminary modelling of high speed lines to Scotland – much closer to the Conservative proposals. While there’s a ‘good case’ for a high speed link to Manchester, the early numbers suggest a ‘particularly strong’ case for lines to Leeds and the East Coast of Scotland. That implies a cash-strapped future government might want to choose between two halves of the Y – a very tough political choice indeed.

*

Update, Jan 2012: the Coalition has now given HS2 the green light. It’s also published some updated cost-benefit modelling. Three things stand out from this.

First, my analysis holds. The overall shape of benefits and costs is the same, although the recession and higher building costs have changed some of the numbers slightly. See page 10 for the new figures.

Second, the modelling almost perfectly explains the politics. Those who gain from HS2 (business, core cities, those in ‘the North’) are strongly in favour; those who lose (communities and homeowners along the line) are vehemently against. Local opponents of HS2 are hardly irrational – quite the opposite. This also suggests that rather than handing a windfall gain to business by pegging HS2 fares to conventional fares, HS2 tickets should be pricier – at least in first class.  That provides another way for taxpayers to recoup some of the initial outlay.

Third, the agglomeration benefits for Phase 2 (Manchester and Leeds) seem much larger than Phase 1 (London to Birmingham). Why? Rather than connecting two relatively distant cities, Phase 2 links a lot of nearby places (e.g. Sheffield/Meadowhall to Leeds in 20 mins), and provides indirect access to big cities not on the line (e.g. from Manchester to Liverpool). The fact of HS2 thus strengthens the case for complementary investments like the Northern Hub, which will bring Liverpool, Manchester, Sheffield and Leeds closer together.

*

Update, Jan 2013: we now have the detailed route maps for the full Y network. Note that these are ‘preferred routes’ – a lot of other cities (e.g. Liverpool, Warrington) are now going to push hard to be included. And it’s still possible that the two legal challenges may change the network shape, as well as slow down implementation.