HIGH SPEED TWO

A SPEEDY ROAD TO ENTREPRENEURIAL SUCCESS? 

Andrew Chappell-London 20 January 2012

The United Kingdom’s proposed high speed train link (HS2) has been plagued with controversy due to its route and its cost. Despite heavy criticism of the project, earlier this month, Justine Greening, Secretary of State for Transport gave the green light.  High Speed 2 will initially run from London to Birmingham, sweeping through the Chilterns, traditionally a Conservative stronghold; with the possibility of extending the network to Manchester, Leeds and to Scotland in areas such as Edinburgh and Glasgow. Construction is due to start in 2016 and ten years later passengers can speedily make their way from London to Birmingham in close to half the time. Transport of London estimates the project will cut the Birmingham-London journey times from 1hr 24min to 45min. Proponents and detractors have been in a tussle about the HS2, with detractors criticising that many have to relocate to make way for the high speed train, moreover the cost of £32.7bn is unrealistic.   Proponents argue the benefits generated will approach £47bn, not to mention the fare revenues of up to £34bn over a 60 year period.  However, while the big players in Westminster fight it out over the pros and cons, what value could it bring to Britain’s wider economy and in particular; entrepreneurs?

‘TIS A SHORT JOURNEY

Much of the central benefits to entrepreneurs and business are the reduction in journey times, hence increased fluidity between cities. Firms would become more flexible in their decision of where to locate as the ease of mobility between markets would be significantly increased. Faster journey times means individuals would be able to spend more productive time in the office or attending business meetings, as well as allowing for more journeys to be made in a day. This is not to say the environment of a train is a completely unproductive one, as many of us do work whilst travelling, but often overcrowding limits the capacity for one to work effectively.  If the journey time savings are enough to incentivise people to switch modes, perhaps from a car or plane to a train then it is widely recognised that time spent working on a train is much more productive than driving. There may be marginal benefits to reduced road congestion, it is forecasted in 2043 that around 11,000 long distance car person trips per day would be transferred to HS2.  A distinguishing feature of the proposed HS2 network is that it will only carry high speed trains; there will be no opportunity for freight or traditional local services. This is believed to improve the journey-time reliability of train services as it would be prone to less mixed-use problems.  Surveys conducted by Passenger Focus suggest that commuters have to incorporate contingency time in the case of delayed services. Improved reliability of journey times would reduce this ‘lost’ time.  For a growing business a vast transport improvement such as HS2 would open up their potential pool of labour to a larger geographical area, as people may be much more willing to work in other cities if commuting times fall. 

ECONOMIES OF AGGLOMERATION

While the individual entrepreneur is speedily making his or her way to a meeting, there’s much benefit for their companies from the so called ‘Agglomeration Impacts’.  A project such as HS2 would have the effect of bringing firms closer together, allowing them to engage more freely in knowledge transfer activities and specialisation. The enhancement of networks between cities is hard to estimate but increasing mobility between cities will also increase access to the markets within that city, opening up a new customer base for businesses. Indeed, the British Chambers of Commerce (BCC) has given the HS2 the thumbs up.  BCC director general, John Longworth stated that “Businesses up and down the country will welcome the government’s decision to proceed with HS2”.

BUSINESS DETRACTORS 

However, HS2 has spawned a number of objections from business. Top Business detractors such as Lord Wolfson, chief executive of clothing company Next states, “It's not in the national interest to spend a huge amount of money on a scheme that is not, in any way, the best investment on capital”.  While, Chris Meredith, head of sales at office provider Offbroker.com says: “As a Midlands-based firm which work within Central London on a regular basis, I for one wouldn't be willing to pay the significant fare increase to use the HS2 service. The £32 billion earmarked for the project could be better used to improve the existing network or supporting struggling areas of the economy such as start-up businesses and small and Medium Enterprises (SME)”. “For what? A few minutes off a journey which the majority already claim they will not take advantage of, either on cost or safety grounds”, the word from estate agent Trevor Kent, who owns a business in Kent, “The value of land along the route has been thrown into crisis, with many home owners and businesses now unable to sell homes”.  However the British Chambers of Commerce still reiterates, “The wins here really do justify the price tag. Business and cities will be brought much closer together [exposing] them to wider markets, improving efficiencies and helping employees boost opportunities and skills”.  Yes, the BCC’s economies of agglomeration clashes with business who say it’s not the best investment in a struggling economy. It is also worth noting that Britain is already lagging behind in the development of their high speed train network. There are networks already in place in France, TGV, and Germany, ICE; not to mention the Chinese who are progressing fast with their high speed venture.  So should the entrepreneurs of today and tomorrow embrace HS2 as a business venture of the future? Have your say…