finance

HS2 go-ahead leaves Heathrow's third runway up in the air | Nils Pratley


In the end, two arguments, both with a flavour of despair, flicked the light to green for HS2. First, £9bn has been spent on the £100bn-ish project already. Second, the official Oakervee report endorsed the HS2’s lobbyists’ cry that there are no “shovel ready” alternatives to add rail capacity.

The latter factor represents a disgraceful failure of planning by the Department for Transport. Successive ministers were bewitched by HS2 and didn’t bother to explore rival schemes in case the costs exploded, as they inevitably did. Faced with shouts from the construction industry that builders will go bust if deprived of their HS2 bonanza, Boris Johnson took the easy political route.

Those of us who believe there are smarter ways to spend £100bn on improving the railways, and quicker ways to deliver “levelling up” benefits, have lost. The only consolation is that recasting phase 2 to make it integrate properly with Northern Powerhouse Rail is a sensible rejig if HS2 is happening. Even so, the mayors of Greater Manchester and Liverpool would do well to check the small print of the “high-speed north” ambition; it sounds vague and thus vulnerable to downgrade.

Yet Johnson’s more intriguing remark was the one about Heathrow, the other big infrastructure conundrum. Asked in the Commons if he still intended to lie down in front of bulldozers to stop a third runway, the prime minister replied: “I see no bulldozers at present, nor any prospect of them arriving.”

It was a throwaway answer and, as things stand, the first part was 100% accurate; Heathrow will only submit its detailed planning application towards the end of this year. Yet “no prospect” is interesting because it plays into the current political buzz that the mood is turning against Heathrow.

Aside from Johnson’s long-standing personal opposition to expansion at Heathrow, there are strong political reasons to refuse a third runway, as Larry Elliott wrote on these pages recently. Putney and Richmond Park, two constituencies under the flight path, were among the few Tory losses in December’s general election; after approving the environmentally damaging HS2, Johnson might recover some green ground; and a no to more south-east infrastructure might score more “levelling up” points.

What’s more, neither of the arguments that carried HS2 over the line apply at Heathrow. There are few sunk costs and the main loser would be Heathrow’s owners, a consortium headed by Spanish firm Ferrovial and the Qatar Investment Authority. As for shovel readiness, the argument would be that no shovels are needed.

Business would grumble but one can imagine Johnson inviting London’s boardroom brigade to get Birmingham International to provide more flights to Asia. As economist Jim O’Neill pointed out, HS2 promises a journey of 38 minutes from London Euston to Birmingham Interchange.

Never underestimate the power of the Heathrow lobby, which is just as determined as HS2’s, but it suddenly looks very easy for a PM with a large majority to kill the third runway. Go for it.

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Is the watchdog being a bad sport on JD Sports?

The Competition and Markets Authority did fine work when it blocked Sainsbury’s plainly anti-competitive proposed takeover of Asda, but the watchdog looks ridiculous in getting so upset about JD Sports’ purchase of Footasylum.

The £90m deal, which has already happened, “substantially lessens competition nationally”, thinks the CMA. Substantially? Footasylum wasn’t enjoying much success on the competitive front, which is why its board surrendered to JD last year at a price that was half the flotation valuation of 2017.

The CMA says fewer discounts and less choice could “particularly affect younger customers and students”. The boffins’ concern is touching but, come on, modern youth knows how to shop around online.

The biggest problem in the trainers and sportswear market is surely the pricing power enjoyed by Nike and Adidas. It’s not obvious that liberating Footasylum would improve matters one jot.

Ocado truly delivers for co-founder

Ocado co-founder Tim Steiner collected a £54m bonus last year, a function of a booming share price and a super-charged one-off incentive scheme that was established five years ago. Quite why he needed the highly unusual incentive in the first place has never been adequately explained. Other shareholders probably let it slip through because Ocado, in those days, was struggling.

Now, of course, the company has a fair claim to being the UK’s most successful technology outfit. It’s worth £8.5bn, supermarkets around the world are snapping up its kit and Steiner’s stake is worth nearly £300m. That is why the £35,000 bump in his salary to £720,000, supposedly to keep him motivated, is bizarre. Surely, with that slug of shares, he’s already incentivised to get up in the morning.



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