Back in 2012, I wrote this Business Rocks post when HS2, the high-speed rail link between London and the North of England, was first proposed:
A new £16 billion high-speed rail link between London and Birmingham (HS2) has been proposed by the government. The Secretary of State argues that each £1 invested in the scheme will generate growth of £1.40, and therefore represents good value for money.
But what are the assumptions that underpin these forecasts? And what are the alternatives to the rail link that will meet the government’s objective (whatever that happens to be)? I have been in too many business meetings where a business case has been presented that is based on spurious assumptions, and we have all seen the cost of too many government schemes double or treble in size, to have any confidence that there is any value for money in HS2 at all.
Sometimes you can’t make a decision simply on the basis of a financial assessment – particularly where most of the data is made up! Instead you must use your commercial judgement and old-fashioned common sense.
The following year, once the budget had gone up by 50%, I wrote this:
In January last year I argued that the UK government’s proposed investment in a north-south high-speed rail link (HS2) would not offer good value for money. In the past week, the projected cost of the scheme has risen by £10 billion while the benefits case has fallen by £21 billion.
My issue with HS2 is that genuine alternatives haven’t been developed or assessed. If the aim is economic growth in the north and increased rail capacity, there are many other ways you could invest, including – off the top of my head – super-fast broadband to reduce the need to travel, double-decker trains, a shift to buses on local routes to free up capacity, more space-efficient carriages to carry more passengers, higher-cost first-class coaches to deter travellers from space-hungry seating, and better and faster transport links between northern cities.
I’m sure that you have more, and better, options. My point is that whenever you have a big decision to make, its quality is dramatically enhanced if you develop and consider genuine alternatives, rather than simply attaching yourself to the first option that comes to mind.
Where do you need to develop better alternatives for a big decision you’re working on?
As I write this, the government is poised to cancel key elements of HS2 and other rail investments in the North. Cost projections have doubled and the benefits are even less clear than they were when the project was first announced.
I’m not one to say, “I told you so” – honest! – but the current situation is just all-too-predictable.
HS2 serves as a great example of how not to make big decisions. Instead, (1) Clarifying the issue you’re trying to resolve, (2) Developing genuine and compelling alternatives, (3) Articulating and stress-testing each alternative’s assumptions and (4) Using sound commercial judgement, are all critical factors in making better decisions.
How well do your big investment decisions apply these four principles?
Off The Record: Runaway Train by Soul Asylum
Runaway train never going back
Wrong way on a one-way track
Seems like I should be getting somewhere
Somehow I’m neither here nor there
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