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Business chiefs slam HS2 'folly'

The Institute of Directors (IoD) has joined those calling for HS2 to be scrapped, branding the £50 billion high-speed rail project "a grand folly".

A survey of IoD members found that just 27% feel HS2 represents good value for money, and 70% say the scheme will have no impact on the productivity of their business.

The survey also showed that there was little enthusiasm for the project even in the regions where the benefits are supposed to be strongest.

In August 2011 a survey of IoD members found 54% rated HS2 important to their business. This figure has now fallen to 41%, with the IoD saying that this illustrated "how businesses see high-speed rail as a lower priority than it was two years ago".

The IoD scepticism over the scheme, which will see a first, London to Birmingham, phase completed around 2026, follows a report last week by the Institute for Economic Affairs (IEA) which said the cost of HS2 could be as high as £80 billion. There were also reports that the Treasury was working on a figure as high as £73 billion for the project which cuts through Tory heartlands in the Chilterns, with a Y-shaped scheme due to take the line to north-east and north-west England around 2032/33 .

The IoD said that a central part of the Government's current economic case for HS2 was that time spent on a train is unproductive. But the IoD said its research showed that this assumption was "wildly inaccurate", as only 6% of directors say they never work on a train. Also, 48% of members say they spend at least half of the journey working, 26% work for between a quarter and half the time, and 21% spend up to a quarter of the journey time working productively.

Commenting on the research, IoD director general Simon Walker said: "Businesses up and down the country know value for money when they see it, and our research shows that they don't see it in the Government's case for HS2. Some of the specific claims that the Government has used to support its economic case for the project have been challenged by our members, who by and large do not feel that their business will benefit."

The £50 billion figure for HS2 includes £7.5 billion for the cost of the trains, with the line costing £42.6 billion.

HS2 Ltd chief executive Alison Munro said: "While we respect the right of the IOD to state its case. While smaller schemes may have higher benefit cost ratios, by their very nature they only make small improvements to capacity and often just move the bottleneck elsewhere on the network. The IoD have not yet released their polling data but it is clear that their members are strongly in favour of increasing capacity with 80% supporting investment in long-distance trains and 41% supporting HS2. There is no other alternative that delivers the benefits of HS2. Through building a world-class 21st century high-speed rail network that will link our great cities, both north and south, as never before, we are focused on delivering within our budget of £42.6 billion to provide the capacity we need on those routes and free up space to expand commuter services and freight."

Transport minister Norman Baker said: "This is not an economic analysis by the IoD. It is a survey of less than 4% of its members who have responded to some of the misleading reports of late. The IoD is simply not aware of the facts. It says we should be investing more in the existing rail network. We are spending £37 billion on this in the next five-year period, undertaking the biggest investment since Victorian times." Mr Baker went on: "The fact is that over the last 15 years the number of long-distance rail journeys in this country has doubled to 125 million a year. HS2 will provide the essential capacity we need in a way that will provide hundreds of thousands of jobs and billions of pounds of economic benefits."

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