ALEX BRUMMER: The folly of scrapping HS2
Britain’s biggest economic challenge is to boost productivity and raise the incomes of the nation’s workforce. Tax incentives are part of the solution, but investment in infrastructure is key.
All the drivers in our political system focus on short-term dividends.
It is not surprising, as the autumn statement approaches, that the Chancellor Jeremy Hunt is looking at ways of releasing resources to prepare for tax reforms.
The three Hs – Hinkley, HS2 and a third runway at Heathrow – all need to be delivered to boost global Britain. Only the super-nuclear plant at Hinkley Point in Somerset has any certainty.
Making an effort: The long-term waste of giving up on big infrastructure is enormous
Enemies of HS2, a combination of Nimby home county residents, green activists and advocates of fixing suburban railways and roads, will be cock-a-hoop should Rishi Sunak and Hunt bring down the guillotine on the Birmingham-to-Manchester leg.
The escalation of the costs (more than twice the early estimate of £33billion) has already led to the eastern leg to Leeds being sacrificed and a grand terminal at Euston delayed.
The long-term waste of giving up on big infrastructure is enormous. It required a mammoth effort by the last Labour government to preserve the fast rail link to the Chunnel and the brilliant refurbishment of St Pancras, in which the country can take pride.
Similarly, it took enormous courage to persevere with the Elizabeth Line (Crossrail) but the difference it has made to travel in the South East is immeasurable. The economic value added at new and rebuilt stations has spread prosperity.
Much is made of how, in an age of AI and social media, the time shaved off HS2’s journey to Birmingham and Manchester will not be significant.
In Japan and France, the pioneering of high-speed rail travel led to fabulous economic development along routes. It is no surprise that Birmingham is sucking in more new business investment than any other conurbation in Britain, adding 36 per cent to the area’s GDP over the last decade or £29billion.
Airport woes: Heathrow is operating with less runways than its major Continental rivals
That is partly the HS2 halo effect. Manchester and way stations along the route could expect the same.
The third H, Heathrow’s new runway, was knocked off schedules by Covid-19. Heathrow is now back at pre-Covid passenger traffic. But it is operating with less runways than its major Continental rivals.
All the preparatory work for a third runway has been done and the case for extra capacity is stronger than ever. The carbon zero lobby needs to recognise that air traffic is not going away. What needs to change is the sustainability of aircraft and incentives to use new greener fuel sources.
One would expect Heathrow to hold back on its ambition until after the general election. An extra runway is essential if the vision of Britain’s tilt to Indo-Pacific is to be fulfilled. HS2, if built, will lift the UK’s neglected regions.
The gleeful, contrived pictures from Nasdaq, celebrating the pop in Arm Holdings’ return to the public markets, are one of the reasons why New York does initial public offerings better than London. The US is the home of razzmatazz, so even if the gloss comes off the Arm stock, it will be gold for investment bankers as they unleash next-generation tech floats.
Here in the UK, we can only look on with deep regret that our flagship Cambridge-based tech pioneer deserted these shores.
Arm’s chief executive Rene Haas and senior colleagues have parked themselves in the US. And while the intellectual property and science remains in the UK, one has to wonder for how long.
We should not forget who is to blame for the fiasco of Arm’s loss to the UK. Theresa May and her Chancellor Philip Hammond treated SoftBank boss Masayoshi Son as a conquering hero in 2016, welcomed him to Downing Street, and did nothing to protect Arm’s integrity. Only one foundation shareholder, Baillie Gifford, opposed the transaction. So galling and shameful.
When Carolyn McCall announced that ITV would be spending £160million developing ITVX, its own streaming services, the shares sank.
The truth is that ITVX is a lifeline for the terrestrial broadcaster at a time when linear advertising is under stress. In the first six months of 2023, active users jumped 29 per cent to 12.5m and ‘dwell time’ is surging.
UK long investors must start to look beyond the next dividend cheque.