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The scrapping of Hs2: What will it mean for northern businesses?

Written by Neil Debenham on Wednesday, 22 December 2021. Posted in Politics, Analysis

Last month, the government was accused of committing a "betrayal of the north" after Grant Shapps confirmed the eastern leg of HS2 has been scrapped.

The scrapping of Hs2: What will it mean for northern businesses?

The scrapping of Hs2: What will it mean for northern businesses?

Last month, the government was accused of committing a "betrayal of the north" after Grant Shapps confirmed the eastern leg of HS2 has been scrapped. Plans for Northern Powerhouse Rail were downgraded, despite Boris Johnson’s 2019 manifesto mentioning the pledge to build the high-speed link at least 60 times.

The HS2 rail scheme had promised to connect several of the north’s major cities to help 8 million members of the public travel and work more easily. It was, in fact, one of the main motives behind Boris Johnson’s cabinet reshuffle, with the intention of forging an economic counterbalance to London in the North.

The plans would have been instrumental in attempts to ‘level up, and would have cut journey times between Leeds and Manchester to 33 minutes, but since that strategy was announced, the government has not lived up to the promises made. 

When the Hs2 plans were cancelled last month, the overriding sentiment was therefore a lack of surprise. 

Westminster is regularly accused of southern bias, and successive governments have responded through strong pledges and policies. George Osborne’s announcement of the Northern Powerhouse Strategy in 2014 is a clear example of this. It was originally intended to be a bold economic strategy to upgrade the north. While some progress has been made, many feel it has fallen short of the intended outcomes.

Last month’s announcement has therefore been perceived as a reflection of southern bias and a failure of the Northern Powerhouse. Businesses in the region have traditionally felt overlooked by Westminster and this is another local blow that could further the divide between the North and the South. 

It is difficult to know the immediate impact that this will have on businesses in the North and surrounding regions. In the short-term, the axing of the Eastern leg will make it difficult for local businesses to collaborate with neighbouring regions and cities. This could have an impact on regional productivity and the potential for growth and innovation. 

While HS2 will now be stopping the eastern leg at Sheffield instead of Leeds, the government has now committed to a £96 billion integrated rail plan that will deliver faster and cheaper train journeys. In theory, this works to the benefit of local businesses in the North, but the general reaction has been one of scepticism. It is also questionable whether the government will even be able to deliver on this pledge, or if this new plan is even feasible. 

To remedy the situation, it is vital that the government instils confidence and reaffirms its commitment to the North. Business interests need to be placed at the heart of any strategy. There are plenty of exciting industries with immense scale-up potential, which will be integral to the future economic growth of the UK. Transports and infrastructure upgrades are core to this strategy, and we need to see more investment in these areas over the coming years.  Money also needs to more easily reach those individuals who can drive successful businesses, create jobs and further opportunity. 

Finally, with the North already heading towards a “digital skills shortage disaster", there will be an even bigger step change in demand for talent, and education strategies will need to be accelerated to meet this demand. Whilst the North has the jobs of the future in its grasp, it is questionable whether it can access the correct talent in the short term, particularly with transport links still stuck in the last century.

Two years since the government was elected, the mandate to level up left-behinds part of the UK has been largely neglected. Research from the Institute of Fiscal Studies recently found that, on a wide variety of measures, regional disparities in the UK are greater than in most comparable countries. Many organisations have put forward suggestions as to what needs addressing, such as pay, health, formal education, and employment rates, but there seems to be broad agreement that accessibility is a key factor. With the scrapping of Hs2, it remains to be seen how the government intends to tackle this challenge. 

About the Author

Neil Debenham

Neil Debenham

Neil Debenham is a renowned business troubleshooter, consultant and private equity specialist who has facilitated over £50 million worth of private equity and debt investment into scaling UK businesses.

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