Kier Share News (KIE)

LONDON, March 9 (Reuters) - Britain said on Thursday it would delay building parts of a new high-speed railway linking London and northern England after the cost of the massive project, known as HS2, soared yet again.

In the latest blow to a project designed to modernise Britain's rail network and add capacity on busy tracks, the government said construction of a section in central England would be pushed back.

"We have seen significant inflationary pressure and increased project costs," British transport secretary Mark Harper said in a written statement to parliament.

Companies involved in building HS2 include Kier Group , Balfour Beatty and Vinci.

First proposed in 2009, HS2 is billed as the largest infrastructure project in Europe and aims to help the UK catch up with other European countries with extensive high-speed rail.

The whole project, which will connect London Euston to Manchester, had been scheduled for final completion from 2035-2040.

But Harper said the section between the city of Birmingham and the town of Crewe around 60 miles to its north would be "rephased" by two years. He did not set a new completion date for the whole northern section linking Birmingham to Manchester.

He also said the section of rail linking HS2 to Euston station in central London would be deprioritised, with work focusing first on joining the line up to a newly-built but much less central hub in suburban north-west London.

"These are the difficult but responsible decisions we are taking, that put the priorities of the British people first, in controlling inflation and reducing government debt," Harper said.

HS2 was expected to cost between 72 billion and 98 billion pounds at 2019 prices, but since then the bill has been pushed up by inflation - which ran at around 18% in the construction industry last year, affecting materials like timber, steel and concrete.

The 2019 budget was already a big jump from the 2015 estimate of 56 billion pounds. The project has also already been scaled back; in 2021 the government scrapped a planned link to Leeds, citing spiralling costs.

Construction of the first part of HS2, from west London to Birmingham, is already underway. (Reporting by Sarah Young and Sachin Ravikumar; editing by William James)