Wrestle with PESTLE: HS2

Reading time: seven minutes

This LCN Says is part of LawCareers.Net’s ‘Wrestle with PESTLE (WWP)’ series, which looks at various business case studies using the PESTLE technique.

Unsure what PESTLE is? Read this previous WWP which explains the technique and this one on greenwashing in the fashion industry.  

PESTLE stands for:

• political;
• economic;
• sociological;
• technological;
• legal; and
• environmental.

This technique involves using these six external factors to analyse the impact on a business and/or industry.

Case study: Britain’s new high-speed railway

High Speed 2 (HS2) is Britain’s longstanding project to build a new high-speed railway. It’s to be built from London to the North West, linking Manchester, Birmingham and London in particular. Let’s take a look at what this means in reality!

Political impact

In 2020, Simon Jenkins wrote an article for the Guardian, where he stated: “HS2 no longer has anything to do with trains, let alone economics, politics or the north-south balance. It’s about Boris Johnson and what sort of leader he intends to be. That is why HS2 is tearing Downing Street apart.”

But why has it caused such a political stir?

In December 2010, the government published a consultation for the ‘Y’ shaped route of the HS2 line. But the proposals attracted criticism because campaign groups and political organisations weren’t happy. In April 2012, five requests for judicial review were submitted, claiming that the government had failed to carry out proper environmental assessments. The High Court dismissed all but one of them; however, this action still suggests political unrest.

As a result of the plans, there have also been some notable shifts in voting patterns within the areas HS2 proposes to run through. For example, in the 2021 Chesham and Amersham by-election, the Conservatives were defeated. The Conservative MP for Stone in Staffordshire, Sir Bill Cash, stated that HS2 has blighted his constituency, and caused so much damage to properties and their value within his area that it’s “wreaked havoc” on his political standing.

Economic impact

The railway is set to be built across a number of phases: phase one, between London and the West Midlands, followed by phase 2a, between West Midlands and Crewe, and phase 2b, between Crewe to Manchester and West Midlands to Leeds.

The budget laid out for delivering phase one is thought to be around £44.6 billion. This is to build a track of 134 miles, which will pass through 31 miles of tunnels and over 10 miles of viaducts. There’s a £9.6 billion budget held as a contingency in case of unexpected events occurring in the building process.

The budget laid out for phase 2a is between £5.2 and £7.2 billion; the budget for phase 2b hasn’t been confirmed yet. But will this outlay be returned? It seems so, as KPMG has estimated that the HS2 rail line could generate up to £15 billion a year in productivity gains for the UK.

These numbers are large amounts of money, but the UK government’s Economic Affairs Committee has said that the case for building it rests on how it will “bring people together” which in turn “drives economic growth”. The secretary of state for transport said that this would stimulate growth outside of London and the South East, meaning that travelling time to places outside of the capital is reduced.

So, why does reducing travel time stimulate economic growth? Professor Henry Overman, professor of economic geography in the department of geography and environment at the London School of Economics, has stated that it would do so in three distinct ways. Firstly, it would enable businesses to employ workers from a larger labour market, and so create employment outside of London. Secondly, it would allow businesses in other cities to access services in London with greater ease. For instance, a Manchester-based business that needed accounting help could gain accounting advice from big London firms at much greater speed.

Finally, it’d allow specialised businesses to reach a larger market, with customers and clients being able to reach the northern cities much more easily.

Social impact

By encouraging more people to travel by train, the amount of congestion in cities will theoretically be reduced. This will not only reduce the congestion in cities (also an environmental impact), but also reduce commute times for those who switch to train journeys and those left driving to work.

Building the line has also created a lot of jobs. The increased employment opportunities will also continue once the line has been built, as they’ll need people to operate the line and the trains.

The main social impact is the reduction in travel time between the cities, allowing people to spend more time on other activities.

Technological impact

The HS2 railway has used forward thinking technology to reduce its risk of failure. Thousands of remote conditioning monitoring sensors have been built into the infrastructure of the railway line, which will monitor its performance. This means that live information will be taken regarding the health of the infrastructure, and a virtual twin of the rail line can be generated once it’s running.

An engineering team in Birmingham will be able to see the data collected and analyse any trends found. Artificial intelligence will then be used to monitor this performance and detect problems that’ll be sent to the maintenance programme.

Virtual reality (VR) is also being used by engineers, who use VR headsets to investigate issues with the track from the safety of their Birmingham office. They can seek out problems and potentially resolve them without even needing to go onsite at the line. These technological advancements are intended to improve reliability and safety, and through VR and augmented reality, the maintenance of the railway line should be easier.

Wondering how a slowdown in economic activity impacts the tech sector? Check out this Commercial Question from Burges Salmon LLP.

Legal impact

Naturally, building a railway means that there are consequences for landowners and occupiers based nearby. Property owners may be blighted by HS2 if they live near the line; properties may reduce in value; and noise pollution may become an issue. Statutory compensation schemes were set up that allowed people whose property was near the line to claim compensation.

There are several current schemes available for property owners:

• The express purchase scheme – this asks the government to purchase the property for the value of its full unblighted market value and allow a claim for a home loss payment.
• The voluntary purchase scheme – eligible owner-occupiers can ask the government to buy their property at its full unblighted market value.
• The need to sell scheme – if owners can’t sell their property because of HS2 then the government should buy it from them.
• The alternative cash offer – owners can receive a lump sum as well as retain their property.
• The homeowner payment scheme – money paid to owners depending on their proximity to the line.

Environmental impact

The Wildlife Trusts has created an open letter stating that “HS2 is failing nature”. Its website states that the HS2 development programme could’ve been a way to revolutionise green transport, but instead it’s causing irreparable damage to wildlife sites. It argues that there are no plans in place within the programme to achieve the best for nature, in particular noting that the wildlife trapped between construction areas are being ignored.

The Woodland Trust is also another organisation that’s raising complaints. It says that HS2 is a grave threat to the UK’s ancient woods, which are at risk of being lost or damaged. That said, there have been some breakthroughs. In 2021, when the Phase 2A Bill was given royal assent (meaning that this stage of the programme could begin), Woodland Trust advocated for change to reduce the impact on ancient woodland. The result was an amendment of the legislation so that HS2 Ltd is now legally required to report on ancient woodland impacts across the project. But, when the HS2 Ltd published its report in February 2022, there was little new information – so did this really have an impact?

At the end of 2022, the High Court granted an injunction to prevent environmental protestors from accessing land that’s been designated for the HS2 route. The secretary of state for transport and HS2 applied for a route-wide injunction, claiming that activists were hindering construction on the route, and that they were committing trespass and nuisance. The judge granted an interim injunction.

Interested in the laws behind deforestation and businesses? Check out this Commercial Question from Shoosmiths.

The verdict

The main drawback of HS2 now is its environmental impact – it’s what is causing protests and the need for legal action to be brought against activists. Technologically speaking, it’s a forward-thinking project (eg, VR and AI) and economically it’s supposed to help the UK economy grow. However, the government needs to ensure that the political and environmental impacts don’t outweigh these benefits.

Follow along with our Wrestle with PESTLE journey, featured in the Commercial Connect Newsletter and via the LCN Says section of the website, by signing up to LawCareers.Net.

Sophie Wilson (she/her) is a current LPC student at The University of Law and a future trainee solicitor at Forsters LLP.