Northern Powerhouse Rail and the Northern Growth Strategy
Analysis and insights from Treasury business case expert - Bradshaw’s Chief Economic Advisor, Andrew Morrison.
The Government’s announcement of a new Northern Growth Strategy, with Northern Powerhouse Rail (NPR) at its heart, is a significant moment in the long history of transport investment in the North of England.
It is framed as a once in a generation upgrade that will improve commutes, connect city regions more effectively, and help drive productivity and growth. It also seeks to reverse a familiar political story of ambition followed by delay.
As with announcements of this kind, it is tempting to reduce the debate to a simple binary. Either you support NPR and the North, or you are sceptical and therefore against it. The reality is more nuanced. Transport infrastructure can be a powerful enabler of productivity and growth. But it only delivers transformational outcomes when it is part of a wider set of place-based interventions and when the programme is designed and governed in a way that makes delivery realistic.
This announcement deserves both recognition and scrutiny. Recognition for its ambition and political clarity. Scrutiny for its economics, its opportunity cost, and its long-run deliverability.
Transport and growth
It is entirely credible to argue that improved rail connectivity across the North could support economic growth. Better transport can increase the size of labour markets, strengthen business links, and reduce frictions that prevent firms from accessing talent, supply chains, and customers. However, transport investment is best understood as an enabling condition for growth rather than growth policy in and of itself.
The biggest productivity gains tend to come when improved connectivity aligns with complementary interventions on housing, skills, local transport and the wider business environment. Done together, these policies reinforce each other and make it more likely that transport investment translates into sustained economic growth.
The economics
Northern Powerhouse Rail has never been a simple proposition. In its original conception, it was often understood as a high-speed and high-capacity scheme, a major piece of civil engineering intended to knit together northern city regions more tightly. That kind of investment can, in principle, deliver productivity impacts through labour market integration and agglomeration. But it also comes with familiar economic challenges. New rail infrastructure is costly, and the passenger demand required to justify it can be hard to demonstrate.
The cancellation of HS2 also changes the context in ways that are easy to miss in public debate. Some of the case for NPR depended on network effects and demand patterns shaped by HS2. Parts of the enabling works and system interfaces that would have supported NPR were also expected to sit within the scope and funding of HS2. With HS2 curtailed, the benefits may be lower and the costs higher than previously envisaged. That does not mean there is no case for investment, but it does mean the economics need to stack up.
There is also a wider point about appraisal and decision making inside Government. The Green Book Review created more space for transformational projects and for the idea that appraisal should not be mechanically reductionist. That is sensible. But economics still matter, especially when budgets are tight and opportunity cost is real. It is one thing to assert that a scheme is transformational. It is another to evidence it. If NPR is ultimately justified on transformational impact, the question is whether it risks becoming a case of hope over judgement.
What is NPR now
One striking feature of the announcement is that it says relatively little about NPR as a single coherent high-speed railway. Instead, it describes a phased package of improvements across a set of city pairs, with early development focused on Sheffield to Leeds, Leeds to York, and Leeds to Bradford.
Longer-term work includes a new route between Liverpool and Manchester via Manchester Airport and Warrington, plus wider improvements across the Pennines. There is a sensible logic to phasing and deliverability, and it avoids the risks of an all or nothing mega project. However, it also raises a basic question. Is this NPR the project, or NPR the label?
Governance and delivery
The announcement explicitly references HS2, including an intention to keep NPR within a fair funding envelope and avoid repeating past mistakes. It also notes a longer-term ambition to build a new rail line between Birmingham and Manchester, while stressing that this is not a reinstatement of HS2 and would occur after NPR.
In one sense, this is politically unavoidable. No major rail announcement can now be made without confronting public scepticism about cost escalation and delivery failure. But the public has a right to expect that an announcement of this scale provides something more concrete on how those mistakes will be avoided in practice, and the absence of that detail inevitably raises the suspicion that lessons may not have been fully learned.
The key point is that lessons are not learned through messaging. They are learned through institutions, governance and delivery choices. If Government wants the public, and the Treasury, to believe that major rail schemes can now be delivered more effectively, it will need to demonstrate a different approach on scope discipline, cost realism, accountability and transparency around risk.
Opportunity cost
Even if one accepts the strategic case for better northern connectivity, there remains a serious economic question about opportunity cost. There is a strong argument, made by organisations such as Centre for Cities, that the binding constraint on productivity is often not the speed of travel between cities, but the quality of access to dense job markets within city regions. On this view, some of the highest productivity returns come from improving the reliability, frequency and reach of local and regional transport networks.
It is important to recognise that Government is already investing substantial sums in intra-city transport, including through programmes such as the City Region Sustainable Transport Settlements. The marginal question is therefore not local transport or inter-city rail. It is how the next pound is best allocated, and whether additional investment should prioritise flagship inter-city connectivity, or deepen the within-city links that unlock agglomeration benefits more directly and more widely.
This is not an argument against NPR. It is an argument for being clear about why this is the best use of scarce capital, and what alternatives have been considered.
Funding
The Government has committed £1.1bn over the Spending Review period to support planning, development and design work, and set a funding cap of £45bn for NPR over its construction period. There is a sensible political and fiscal logic here. Early-stage investment creates momentum without forcing immediate decisions on the full cost and funding profile. But the harder question remains how this becomes a funded, deliverable programme over the long term.
Those later years will be defined by real pressure on public spending, including rising defence commitments and limited fiscal headroom. If NPR is to become more than a long-term aspiration, the test will be whether future Spending Reviews can sustain a credible funding path, and whether the programme can be managed within its envelope without diluting the benefits that justify it.
Conclusion
The UK needs a serious strategy for raising productivity and spreading economic opportunity. The North of England has deep strengths in advanced manufacturing, clean energy, financial and professional services, life sciences and technology. Better connectivity between major city regions can be part of the answer. But if NPR is to succeed where so many previous transformational schemes have struggled, it will require stable scope, strong governance, credible funding and integration with wider place-based policy.
Announcements are easy. Delivery is hard. The question now is whether Government can sustain a programme that is disciplined enough to be delivered, but ambitious enough to matter.
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