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UK's high-speed rail (HS2) lining up a Chinese company

Infrastructure is top priority policy in the UK at the moment. Since the General Election in Dec-2019, apparently all that occupies Prime Minister Johnson’s thoughts is ditching “austerity” (which has been around since 2008) and embracing instead a policy of rampant investment into infrastructure. That appears to be one of the reasons that a more cautious Chancellor of the Exchequer, Sajid Javid, resigned.

A much-needed part of that infrastructure is the delayed high-speed rail (HS2) project to connect London with the Midlands and the North of England. The first part of the project has been quickly approved, although questions remain about the sections that follow. It seems that a Chinese company has approached the government, promising to build the HS2 faster and cheaper, and with faster trains.

If such a scenario were to emerge, does that mean that Chinese interests might pitch to build the even more delayed third runway at Heathrow Airport? They already have interests at two UK airports, including Heathrow.

Summary

  • An infrastructure-driven government has quickly confirmed the first phase of the UK’s high-speed rail project (HS2) after years of delay.
  • Now the government is talking to Chinese interests about their promise to build the HS2 faster and cheaper.
  • Chinese operators are increasingly big investors in airport infrastructure.
  • So – there could be a prospect of them building Heathrow Airport’s third runway too.

‘High-speed’ has been anything but

Mr Johnson has been talking in terms of a 20-mile bridge connecting Scotland and Northern Ireland (he once aspired to a ‘garden’ bridge over the River Thames in London while he was the London Mayor), and quickly ‘railroaded’ a decision to go ahead with the HS2 high-speed rail project through Parliament.

The trouble with ‘high-speed’ in the UK is that it isn’t.

Putting aside the delays in coming to a final decision – four years – the construction timetable continues to slip, and the 2026 date for completion of the first section between London and Birmingham looks unachievable as things stand.

As for the second phase, connecting to Manchester and Leeds, achievement of that phase is being talked about in terms of 2040 now, rather than 2033, by which time entirely new technologies like Hyperloop might be commonplace.

Indeed, no final decision has been made on that section, which is subject to yet another review to find cheaper options, and it is possible that the Manchester section of the line could terminate at Crewe, a station thrown in as an intermediate phase, with slower trains completing the journey to Manchester and to Liverpool.

The latter city is understandably miffed by having been left out of the scheme altogether.

Mr Johnson will be judged on his commitment to the north and Northern voters

That would infuriate Northern leaders after Mr Johnson’s pledges to support the ‘Northern Powerhouse’ (and the Northern voters who helped put him in power by walking away from their traditional party, Labour, in droves).

UK high-speed rail (HS2) route

Source: HS2.

Dark Blue = Phase 1: London to the West Midlands (confirmed).

Light Blue = Phase 2a: West Midlands to Crewe (not yet confirmed).

Orange = Phase 3: Crewe to Manchester and West Midlands to Leeds (not yet confirmed).

Almost immediately it was reported that Britain had entered talks with China about building HS2 – after a Chinese company claimed that it could complete the project in only five years, for less money and at faster train speeds (260 mph/420kph).

That itself was an incautious move in the light of the UK government giving Chinese firm Huawei a role in the UK’s 5G mobile phone network, which angered Washington.

The Chinese firm has built two-thirds of all the world’s HS rail lines

The Chinese party is the state-owned China Railway Construction Corporation. Over the past decade, CRCC has helped transform China’s surface transport system and built most of a 25,000km high-speed rail network– accounting for a two-thirds share of all fast train lines in the world.

CRCC has also indicated it could slash costs, which are now estimated to be over GBP100 billion. It seems as if CRCC’s offer is to build the entire line by the middle of this decade, but that would also mean rapid implementation of new planning permission laws to ride roughshod over local objections, which would go not go down well with local Conservative associations that are in the way of the line.

But Mr Johnson’s power base with a large House of Commons majority is huge and growing. He has replaced Mr Javid as Chancellor of the Exchequer and effectively will control the country’s purse strings.

Other issues concern potentially conflicting standards and safety requirements.

This is not the first time HS2 has been discussed with the Chinese

The UK has previously discussed investment in HS2 with China. In 2015, then-Chancellor George Osborne proposed to open up contracts worth GBP11.6 billion on the project.

Because HS2 is actually underway (there are building works in London and Birmingham), one suggestion being made is that Chinese collaboration could be restricted to the second stage (Manchester/Leeds), which would be fast-forwarded.

Proposed Birmingham Curzon Street HSR station (on which work has already begun)

Source: Building.co.uk.

Chinese firms are active around the world in the airport sector

What China is offering here is speed and relatively low cost. That is what such Chinese companies do in many countries in the world (and they are particularly strong in Africa).

According to the CAPA Airport Investors Database, there are at least nine Chinese organisations involved in airport investment, management and construction globally, in countries including the Philippines and France, as well as on the African continent. And there are at least the same number hopeful of doing deals (for example in Greece) or have pitched for them in the past.

They are construction firms, banks, conglomerates even sovereign wealth funds.

Two major UK airports have a big Chinese presence

Interestingly, two of those Chinese firms are already active in the UK.

China Investment Corporation (CIC) is a shareholder in Heathrow Airport Holdings, and Beijing Construction & Engineering Group is the major shareholder in the GBP800 million Airport City project at Manchester Airport.

If the Chinese bid to build HS2 is given the go-ahead, in full or in part, does that mean that Chinese firms could also bid to build the third runway at Heathrow Airport, when exactly what form it will take has been decided and when (if) it is rubber-stamped?

It is worth remembering that while the Johnson government might have gone mad on infrastructure, Mr Johnson himself is anti-Heathrow; while he was mayor of London he wanted to close it down and shift all the jobs out to a fanciful new airport floating in the River Thames estuary well out to the east of the capital.

Heathrow’s runway seemed a fait accompli last year, but it isn’t, and Heathrow is being severely scrutinised yet again – for environmental complicity and for the cost of that runway and associated infrastructure.

The fact that Chinese interests are already in situ in the UK and very active at major airports, including Heathrow, does make the possibility more likely.

And the UK government will feel shamed, not only by the speed at which Beijing Daxing Airport was built, but also by the revelation this week that Istanbul Airport plans to open its third runway on 18-Jun-2020, increasing capacity from 80 movements per hour to 120. That airport only opened in Oct-2018 and it will soon have more runways than Heathrow.

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