Facts Sheet 6. Cost escalation for railway projects in the UK

Updated May 2017

This facts sheet was first produced in August 2002.  The update is the same as the original except for minor typographical changes, the addition of the latest cost for the West Coast Main Line Modernisation Programme and the addition of item 6, the Great Western Electrification extended by comment by Lord Berkeley in the Railway Technology Magazine of April 2017 and, item 7,  by Lofd Berkeley's comment, reference HS2, in the same magazine.

1. At privatization in 1994 the British Rail forecast for track maintenance beyond 2001 was £774 million per year  (source, page 11 of the prospectus issued in advance of sale). At 1999 prices that amounts to £0.888 billion.
2. In contrast the network management statement for the years 1996/7 and 2000 provide an annual average for the 10 years 1995/6 to 2005/6 at 1999 prices of £2 billion per year.  The 2001 network statement provides an average of nearly £3 billion per year at the 2001/02 price base for the five years 2001/2 to 2005/6.  Thereafter the cost is forecast to taper off to £2.2 billion in 2010/11.The increase from £0.888 bn to nearly 3 billion, a factor of over 3 is typical of the appalling record the rail industry has for estimating its costs.  Other illustrations follow at 3, 4 and 5 below.
3. The West Coast Main Line Modernisation Programme was to cost £2.35 billion in 1997, £2.95 billion in March 1999, £4.75 billion in October 1999, £5.56 billion in January 2000 and £5.8 billion at the start of the Public Inquiry in February 2001.  (Source is the Overview Paper produced in May 2000 and a report to the Rail Regulator by Booz-Allen and Hamilton dated June 2000). The price rose to £6.3 billion during the inquiry when there were press reports that it would cost £9 billion.  By August 2002 the press was reporting £13 billion, but that was cut to £10 billion after the Regulator struck out enhancements otherwise required for the originally proposed 150 mph speeds.  That was reduced to £7.3 billion only to rise again to £10 billion as reported today, January 2012.
4. An old cost for the Train Protection System is £1 billion but that rose to £6 billion according to the press but the number was subsequently quoted as 3.8 billion.
5. Meanwhile the overall cost of Railtrack's original nation-wide Modernisation Programme rose from £50 billion through £60 billion to a projected £73 billion - Sufficient to build the residential accommodation for a city of 1.5 million people.  Where that programme now stands is not clear. The original cost estimates misled the Government and shareholders into commitments which may never have been considered if the actual costs had been available.  Possibly these massive cost failures are deliberate.  In any case they are mirrored by equally massive misrepresentations to do with capacity, safety and other issues, see other facts sheets.
6. The Great Western Electrification was to cost £874 million in 2013. Today, December 2016 the cost is £2.8 bn.  In addition other electrification is to cost 0.7bn and other route modernisation, £2.1 bn providing a total of £5.6bn at 2012-13 prices.  Then we have the trains.  These, procured over 27.5 years, have a 2014 present value cost of £4.1bn.  (Source, except for the £874 million, National Audit Office, 9th November 2016).  Lord Berkeley in the Rail Technology Magazine of April 2017, under the heading Railway Costs Through The Roof, says "The cost of electrifying the Great Western Main Line (GWML) from Paddington to Bristol and Swansea has risen from £800m to 4.2bn, although the government tries to obfuscate these figures by reducing the scope and lately, arguing that, since all the IEP trains will now have diesel motors in them, some of the original sections to be wired can be omitted ......".  Lord Berkely canvasses a number of reasons but not the obvious, namely under estimates lead to commitments which the government can then not withdraw from.
7. HS2: - Lord Berkeley, again in Railway Technology, Costs Through the Roof,  of April 2017 writes,  “... expert QS Michael Byng costed HS2's design of Euston Station and subsequently the whole of phase 1, and has demonstrated to HS2, officials and ministers, that the cost is £48bn not £24bn .....