HS2 Recovery Plan Faces Critical Test as Contract Talks and Euston Costs Remain in Focus

The success of the latest attempt to reset the HS2 programme will depend heavily on the outcome of ongoing negotiations with contractors and whether a clear delivery strategy can finally be established for London Euston, according to a new report from the National Audit Office (NAO).

While the independent spending watchdog acknowledges that both the Department for Transport (DfT) and HS2 Ltd have made progress in reshaping the programme, it warns that significant financial and commercial challenges continue to threaten delivery.

Among the biggest concerns are unresolved contract negotiations, escalating station costs, governance arrangements and the long-term funding required to complete the London terminus.

Costs continue to rise

The government's latest estimate places the total cost of completing HS2 at between £88 billion and £103 billion, almost twice the projected cost of delivering Phase One when estimates were published in 2020.

The NAO says that controlling future expenditure will require a more disciplined commercial approach than has previously been achieved.

A key element of the programme reset centres on renegotiating major contracts across the project. However, the report concludes that earlier attempts by HS2 Ltd to reset commercial agreements failed to deliver the intended outcomes.

According to the watchdog, the organisation entered negotiations without a sufficiently detailed understanding of the remaining work, lacked robust cost information and had not managed some contracts effectively enough to strengthen its negotiating position.

The report also found that proposals requiring contractors to assume greater levels of commercial risk received little support from the supply chain.

HS2 Ltd has since revised its approach, with new commercial arrangements designed to encourage more efficient delivery while providing stronger incentives to control costs.

Historic costs under review

The review has already identified around £500 million of costs considered to be disallowable, highlighting the scale of historic commercial issues being examined across the programme.

Negotiations with contractors were originally expected to conclude earlier this year but are now forecast to continue until the autumn of 2026.

Despite the delay, HS2 Ltd believes the wider commercial reset could avoid approximately £2 billion in future delay-related expenditure if successful.

However, the NAO cautions that contingency plans should be strengthened should the negotiations fail to achieve the desired outcomes.

Euston remains the biggest uncertainty

Beyond the commercial discussions, London Euston continues to represent one of the programme's most significant risks.

The station is now being delivered as a standalone programme, bringing together the construction of the HS2 terminus, redevelopment of the existing Network Rail station, wider transport improvements and substantial commercial and residential regeneration.

In April 2026, Euston Delivery Company Limited was established to provide unified leadership for the project following previous criticism over fragmented governance arrangements.

Although the organisation is intended to become the single body overseeing delivery, the NAO notes that it has yet to become fully operational and still requires the appointment of a permanent Chief Executive.

While a strategic vision for the site has now been agreed, the report concludes that detailed scope, programme and cost estimates remain less developed than for other sections of HS2.

Completing the station is expected to require an additional £4.1 billion of public funding, on top of the £3.8 billionalready invested.

A defining period for Britain's largest infrastructure project

The NAO's findings underline the scale of the challenge still facing HS2.

Although governance has improved and efforts to regain control of costs are beginning to take shape, the project remains at a pivotal point.

Successfully concluding negotiations with contractors, strengthening commercial oversight and establishing a credible delivery plan for Euston will be fundamental if confidence in the programme is to be restored.

With costs continuing to climb and public scrutiny remaining intense, the coming months are likely to prove decisive in determining whether HS2's latest reset marks a genuine turning point or simply another chapter in the project's long-running efforts to regain control.