UK wants to lease new £33bn high-speed rail line

The government wants to lease a proposed high-speed rail line linking London to Birmingham, Manchester and Leeds to the private sector one year after it is completed. Construction of the line would be on balance sheet, but the private sector would be called upon to help fund its stations.

The UK government is considering leasing a planned high-speed rail line connecting London to Birmingham, Manchester and Leeds, known as High Speed 2 (HS2), to the private sector to help recoup some of its estimated £33 billion (€37 billion; $53 billion) cost, once the line is built.

“We’ve been clear that there would be opportunities for private capital to become involved in HS2 at an early stage through investment in stations and property development, but it is likely to be largely public funding that is used to build the main railway,” explained a spokesman from the Department for Transport.

“However, once the railway is built we would clearly consider all options to realise value from it. One such option would be the sale of a concession to run HS2 as we have done for HS1. However, no decisions have been made at this stage,” the spokesman added.

His comments are in response to an interview granted by UK transport minister Phillip Hammond to the Financial Times last Friday, where the minister said he was considering leasing HS2 as a 30-year concession one year after the line is built. Hammond said the actual track would be built using taxpayers’ money, ruling out the use of schemes such as public-private partnerships to build it.

The idea for the lease follows the successful auction of the UK’s only high-speed rail link – the line connecting London to the Channel Tunnel, known as High Speed 1 (HS1) – to a consortium of Borealis, the investment arm of Ontario Employees Retirement System, and the Ontario Teachers’ Pension Plan for £2.1 billion. The sale helped the government recoup over a third of the line’s €5.8 billion upfront cost.

Hammond would also like to get the private sector involved in funding the construction and refurbishment of the stations required for the new line.

HS2 is currently in public consultation until June 29 and is not expected to start construction until 2017. The first stretch of the line is expected to cost £17 billion, and would connect London to Birmingham. The full scheme is not expected to be up and running until 2026.