Costain Share News (COST)

(Sharecast News) - The government has decided to go ahead with the HS2 link for high-speed rail between London, the Midlands and northern England after months of uncertainty over the £106bn project.
Prime Minister Boris Johnson told MPs the government would back the initial line from London to Birmingham and a further phase from Birmingham to Leeds and Manchester. Critics of the plan, which is Europe's biggest infrastructure project, had called for its scrapping after estimated costs ballooned.

Johnson told the House of Commons: "The cabinet has given high-speed rail the green signal. We are going to get this done."

The announcement sent shares of the project's contractors up. Kier Group rose 8% to 113.8p, Costain gained 5.7% to 205p and Balfour Beatty was up 3% to 281p at 13:46 GMT. Morgan Sindall rose 1.8% to 1,898p and Keller gained 2.3% to 879p.

Neil Wilson, chief market analyst at Markets.com, said: "It's Christmas Day come early [for these companies]. The final approval wasn't in doubt in the end - the last few days the wind was blowing in one direction only - but it removes a final overhang for these stocks. And the more the project 'runs over budget' the more money they make."

The rail line is meant to speed up travel between London, the Midlands and the North and also to increase capacity. HS2's critics have argued it is a waste of money and that funds would be better spent improving regional rail networks.

Johnson tried to head off those attacks by imposing greater government oversight of the project and promising improvements in local transport including £5bn for better bus services over five years.

HS2 Ltd, the company that has managed the project, will keep the London to Birmingham line but lose responsibility for building the Euston terminus in London. Links from Birmingham to Leeds and Manchester will be part of a northern regeneration programme.

The link's original budget, produced in 2012, was £33bn. That figure was revised up to £56bn two years later and £88bn in 2019. An unpublished recent estimate put the bill at up to £106bn.

Johnson criticised the project's managers for costs that had "exploded" and said he would give a minister the full-time job of overseeing HS2 to avoid "further blowouts".

The government has faced conflicting pressures over HS2. Some Conservative MPs think it costs too much while others oppose it because it will run through their constituencies. Andrew Bridgen, a Conservative MP, told Johnson HS2 would be "an albatross" around the neck of the government.

But Birmingham's Conservative mayor Andy Street has been vehement in his support for the project and the government also needs to show commitment to new Tory voters in former Labour seats in the Midlands and the North.

Jonathan Geldart, director general of the Institute of Directors business group, said: "The HS2 saga has not been a good advert for the UK's ability to build major infrastructure, but now the decision has been made, many businesses in the Midlands and North will just want to see the government get on and build it.

"Splitting the project into more manageable chunks makes political sense, but it also has a degree of business sense, provided the right controls are in place. Improving the rest of the transport network in the North, and making sure HS2 connects up, is just as important."

Make UK, which represents manufacturers, was more positive, hailing the decision as "bold, sensible and pragmatic".

Stephen Phipson, Make UK's chief executive, said: "For too long poor regional connectivity and, the UK's creaking infrastructure, have been major contributors to the regional imbalance between the North and South, as well as the continuing poor productivity performance which urgently needs lifting."

"However, this was never an 'either or' decision favouring one project at the expense of other infrastructure investments including better East West links, especially across the Pennines. Government now has a once in a generation opportunity to develop a fully integrated transport plan for the whole country."