ALEX BRUMMER: The folly of scrapping HS2

Britain’s biggest economic challenge is to boost productivity and raise the incomes of the country’s workforce. Tax incentives are part of the solution, but investment in infrastructure is key.

All the engines of our political system are focused on short-term dividends.

It is no surprise that, as the autumn statement approaches, Chancellor Jeremy Hunt is looking for ways to free up resources to prepare for tax reforms.

The three Hs – Hinkley, HS2 and a third runway at Heathrow – must be delivered to boost global Britain. Only the Hinkley Point supernuclear power station in Somerset has any certainty.

HS2’s enemies, a mix of Nimby county residents, green activists and advocates for repairing railways and suburban roads, will go ballistic if Rishi Sunak and Hunt bring down the guillotine on the Birmingham to Manchester stretch.

Escalating costs – more than double the initial estimate of £33bn – have already led to the eastern leg to Leeds being sacrificed and a major terminal at Euston being delayed.

The long-term waste of giving up large infrastructure is enormous. It took a mammoth effort by the last Labor government to preserve the fast rail link to the Chunnel and the brilliant redevelopment of St Pancras, of which the country can be proud.

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 in new and rebuilt stations has spread prosperity.

There is a lot of talk about how, in an age of artificial intelligence and social media, the time that will be reduced from HS2’s journey to Birmingham and Manchester will not be significant. In Japan and France, the high-speed rail travel initiative led to fabulous economic development along the routes. Not surprisingly, Birmingham is absorbing more new business investment than any other conurbation in Britain, adding 36 per cent to the area’s GDP over the last decade or £29bn. This is partly due to the halo effect of HS2. Manchester and way stations along the route could expect the same.

The third H, Heathrow’s new runway, was off schedule due to Covid-19. Heathrow is back to pre-Covid passenger traffic. But it operates with fewer runways than its main continental rivals.

All the preparatory work for a third runway has been done and the case for additional capacity is stronger than ever. The zero carbon lobby must recognize that air traffic is not going away. What needs to change is the sustainability of aircraft and the incentives to use new, greener fuel sources.

Heathrow would be expected to hold back its ambition until after the general election. An additional track is essential if the vision of Britain’s tilt toward the Indo-Pacific is to be realized. HS2, if built, will improve underserved regions of the UK.

Armed robbery

Nasdaq’s cheery, artificial imagery celebrating Arm Holdings’ successful return to the public markets is one reason New York does better IPOs than London. America is the home of the hype, so even if Arm’s stock loses its shine, it will be gold for investment bankers as it unleashes next-generation tech floats.

Here in the UK, we can only see with deep regret that our iconic Cambridge-based technology pioneer has left these shores.

Arm CEO René Haas and his senior colleagues have stationed themselves in the United States. And as long as intellectual property and science remain in the UK, the question is how long.

We must 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 like a conquering hero in 2016, welcoming him to Downing Street and doing nothing to protect Arm’s integrity. Only one foundation shareholder, Baillie Gifford, opposed the transaction. So irritating and embarrassing.

X Factor

When Carolyn McCall announced that ITV would spend £160 million developing ITVX, its own streaming services, shares sank.

The truth is that ITVX is a lifeline for the terrestrial broadcaster at a time when linear advertising is under pressure. In the first six months of 2023, active users increased 29 percent to 12.5 million and “dwell time” is increasing.

Long-term UK investors should start looking beyond the next dividend check.