Why is UK infrastructure so expensive?

Question

Current official estimates for the proposed UK railway line High Speed 2 are £42.6 billion for a 192 km line, or around £222 million (€287 million) per km (if my calculations are correct). A 2020 review suggests it could even cost as much as £106 billion (€126 billion), or £552 million (€656 million) per km.

The French LGV Est total cost is around €4 billion for around 300 km, or €13 million per km — a factor 22 less than the initial UK price or a factor 50 less than the 2020 high estimate.

The German Nürnberg-Erfurt high speed railway line total cost is estimated at around €5.1 billion for 190 km, or around €27 million per km — a factor 10 less than the initial UK price or a factor 24 less than the updated price.

The Swedish planned Östlänken line is estimated to cost around 30 billion SEK (€3.2 billion) for 150 km, or around €21 million per km.

The French, German, and Swedish high speed railways are all in a range of 10–30 million €/km. Why is the cost for the UK High Speed 2 a factor 10–50 higher? What makes it so expensive?

---

The costs for a third runway at Heathrow Airport are estimated to be £18.6 billion £32 billion^source. For comparison, the 2003 Polderbaan was €320 million, which is far less even when taking into account inflation. Quoting the Financial Times:

While an additional runway would indeed seem desirable, it would not be worth paying such exorbitant costs. Why such projects are so expensive and so difficult to implement in the UK is, to me, the big puzzle. It cannot just be because southern England‎ is densely populated. So is north Holland, where Schiphol, with far more runways than Heathrow, is located.

Answer 1

The following information comes from this report, which was published by the British Government.

I'm not going to summarise the whole thing, but go over the major points. However if you are interested in the topic I suggest you read the whole thing, or even take a look at the more technical version which can be found here.

The report breaks down the higher costs into three issues:

1. Policy and systemic issues
2. Funder/client issues
3. Supply chain delivery issues

---

Policy and Systemic Issues:

• Urban Density: The report indicates that high urban density coupled with high land costs has driven up the price of infrastructure in the UK, however it says that it does not adequately explain the whole problem.
• Planning and consultation process: Inconsistency between how planning works with different areas of the country as well as general constrains placed on the early planning process has been marked as a key driver of higher costs in the UK than Europe.
• Regulatory Compliance: The report indicates that high environmental and safety regulation has led to what some contractors call "not cost effective". However the report also mentions that the UK has the best safety record in Europe. So it would be a tradeoff to lose such regulations.
• Wider construction market issues: The UK has the smallest construction market of the big five countries in Europe which has seen a shift from fixed to variable resources. This means there are less firms investing in construction which leads to higher levels of subcontracting and supply chain specialisation. The report argues that this leads to higher transaction costs along the supply chains.

---

Funder and Client Issues:

• Stop and start investment: The report makes a very interesting argument here whereby it says that the UK's short term investment plan compared to Germany and Frances long term investment plans, allows the latter countries to reduce costs. This is because it allows for opportunity for innovation and the ability to plan work more efficiently. As well as the fact that it generates investor certainty as the projects are more long term.
• Poor governance and ineffective incentivisation of cost control: The report argues that the tender process is not focused on cost minimization and there are not enough ways to incentivise it. As most projects work through a quoted budget as opposed to aiming for the lowest cost for a required peformance.
• Poor asset information and cost data: The report argues that lack of information about infrustructure costs makes for poor descion making.
• Commercial issues and procurement processes: The UK relies heavily on bespoke specifications and contracts, where out of the box solutions would often suffice. Many western european countries have the nature of these contracts codified in law, whereas the UK doesn't.
• Insurance: More expensive in the UK

---

Supply chain delivery issues

• There is poor supply chain integration in the UK
• There is high fragmentation among construction industries in the UK leading to inefficincies
• Large skills gap
• Lower productivity

---

tl;dr

"There is no single overriding factor driving higher costs. However, the investigation has identified that higher costs are mainly generated in the early project formulation and pre-construction phase"

Answer 2

Rights to good working conditions and a decent environment costs money. Which is good, because yourself and/or other people get to enjoy those rights.

However, that also applies to Germany, France and Sweden.

Real estate is expensive in the UK, perhaps related to having higher population density than any of the other countries mentioned. That's probably the main cause of the difference (however, I have no idea).

Also, depending on how project costs are calculated it can be difficult to compare -- for example, one project might announce costs which fully account for maintenance over a 10 or 20 year period (or insurance of some sort similarly covering that), whereas in another case the announced cost may exclude a lot of things that in the end have to be paid for.

If that doesn't explain everything, maybe it's possible to find something dodgy about the conditions surrounding the contract being awarded?