Richard Construction Limited is considering to invest in Birmingham mixed
development (residential and commercial) due to hs2 project. In this report we
are going to discuss 4 topics
1)overview of HS2
2)West Midland economy pros
and cons caused by HS2
3)Challenges and benefits of mixed development for Richard construction
4) Examination of practical implications of the investment
that Richard Construction Limited must consider before deciding on the
After we finish discussion of all the issues above,
conclusion will be made whether it is a good idea to invest for RCL or not.
The issue of
new high-speed railway in UK
didn’t appear out of thin air , many factors like:
rise in Long distance passenger demand (as shown in graph 1)
road system becoming crowded with limited ability to keep increasing capacity.
offering high-speed rail will encourage more people to travel by train
relieving gridlock in city centres
will provide jobs for those involved in building and running the new HS2
rail will take travel away from short distance air-travel , leaving a lower
time of the travel . (graph 2 )
Graph 2 (source www.gov.uk)
contributed to increased need for new high-speed railway and in the end led to creating
company HS2 LTD to build it.
HS2 is a new high speed railway line under development by UK department of transport, which will connect
London Birmingham Manchester and Leeds and has
two phases :
1) London (Euston train station) and Birmingham
(Curzon train station) , scheduled to commence in 2017 to be ready for the
opening to passengers in 2026
Line length – 140 miles (225km)
Cost – around £22bn ($30bn)
2) Manchester and Leeds
Line length – 190 miles (306km)
around £20.6bn ($28.6bn)
The route is also referred to as
the Y network since it is roughly in the shape of the letter Y.
It is one of
the most substantial transport infrastructure projects ever built in the UK.
The project will provide vital
transportation links between cities and regions across the United Kingdom.
The HS2 network will reduce journey times between some of the UK’s largest cities and also create
economic benefits and thousands of jobs.
The HS2 will be operated with
high-speed only trains and classic compatible trains offering higher seating
capacities, to serve the large volumes of passengers arriving at the same time.
only trains operate only on high-speed tracks, while classic compatible trains
run on high-speed and existing tracks.
High-speed trains will run at a speed
of 225 miles an hour (mph). Each unit will have a length of 200m and the
capacity to carry 1,100 passengers.Two vehicles can be joined together for
operating during peak times. High-speed trains will require different types of
stations, offering a platform height of 760mm.
Involved contractors by 2012 :
CH2M Hill was appointed as a development partner to provide
engineering, design and environmental assistance for the HS2 project, in
March 2012, HS2 contracted the ERM Temple Group Mott MacDonald Consortium,
Atkins and Arup to undertake environmental impact assessments (EIAs) for the
April 2012, HS2 placed contracts with Mott Macdonald, Atkins, Capita Symonds
Ineco JV and Arup for designing various segments along the high speed line.
May 2012, Parsons Brinckerhoff was awarded contracts to design high speed rail
systems for the first phase of the project and to deliver design changes on the
present Network Rail systems at major interface points, to allow the
construction of HS2
Is it good
On one hand :
1) amount of
jobs increase(according to www.gov.uk 14 000
new jobs will be created and 600,000 square metres of new employment floorspace
2) a lot of
companies/people benefit (selling lands/winning tenders during redevelopment of
over 140 hectares of land )
provide space for 2000 new homes
1.3 billion pounds a year to the local economy (HS1 provides £300m boost to Kent
economy in first decade of service)
in tourism (means more money for everyone in the area)
6) The northern cities served by the new
line, which will be better connected to each other and to the south of England will
On the other
1) Places further away from the line, like Wales, aren’t
expected to see any economic benefits and could lose
jobs as a result
2)The Wildlife Trusts say both phases directly affect
nature reserves and wildlife sites which could lead to a net loss in
3)The Chilterns, Buckinghamshire and
Oxfordshire – here, historic buildings are at risk of damage or demolition, and
remaining residents will face noise pollution
4) Some residents in Mexborough, South
Yorkshire, will lose their homes. Sixteen of 216 homes on a housing
estate in Mexborough will be demolished
5) Thousands of people living in Camden, north-west London,
face years of disruption during phase one. Parts of the Regent’s Park Estate
will also be demolished
Graph 4 (source KPMG analysis)
Total annual impacts on GVA for the West
Midlands metropolitan area are estimated at £1.5 billion in 2026,
with a growth in workplace employment of approximately 22,000.
As we can see from graph 4 annual increase in GVA for
WMM(west midland metropolitan) is approximately 1.5 billion pounds in 2026, and
workplace base employment
The table below shows the impacts on residence – based
employment, average wages and GVA by sub-region.
Graph 5 (source KPMG analysis)
Economic impacts of an HS link from London to Birmingham
The impact of High Speed services between Birmingham and
London have been tested in isolation, to determine the contribution they would
make to the initial HS2 + regional rail enhancements scenario. The High Speed
link will impact on connectivity levels for places that will gain an improved
direct or connecting service to London
Graph 6 (source KPMG analysis)
Total annual workplace GVA impact to for
the West Midlands Metropolitan Area with a high speed line to London is estimated at 600 million pounds in
2026, with a growth in workplace employment of 10,000 . The majority of
benefits come from increased business-to-business connections . This is a
little less than half the benefit measured in the HS2+ regional rail
enhancements scenario. The majority of benefits are withing Birmingham.
Graph 7 (source KPMG analysis)
Using Treasury ‘green book’ appraisal guidance and
productivity impacts in the West Midlands, the net national tax revenue
generated by the core scenario is estimated to be around £6.4bn over 60 years
(in net present value terms). For HSR only, the implied net national tax increase
would be only £2.7bn.
To sum up :
1)HS2 combined with RRSE will boost the west midlands
economy , creating 22 000 permanent jobs and 1,5 bn pounds impact on GVA by the
2) HS2 between London and Birmingham without extra
regional enhancements would deliver less than half those benefits.
3)A stronger WM economy as a result of HS2,and complimentary
rail improvements , would generate tax revenue of some 6.4 bn pounds. This
could finance new and improved infrastructure.
Additional benefits may include:
transport will have more users
local air quality caused by fall in carbon emission
will have easier way to go to work
all roads national or local congestion will be reduced
all this is why it is positive for West midlands , lets talk
about why it may be negative
1)First there are
a lot of projects which will cost much less and in the end produce higher
growth of west midland economy and most of them don’t need such a long period
of time to finish.
forecasts that there will be high demand doesn’t necessarily mean there will be
3)it will be
easier to work far away so qualified workers may change their jobs and find one
in cities like London
4) for people
involved in construction industry it will be harder to find workforce ,because
most of them will be involved in the hs2
5) price of
electricity may rise because of increased need
There are several challenges that the company must overcome
to be successful in mixed development , these include:
1)isolation of sound – it is very important for every
resident, even through they know big city is not a place where you can live
quite life , not to hear irritating sounds that in this case may come from
restaurant , bar or any other place which is nearby . this means that the
company will have to spend more money to make it comfortable for clients or
else public figure of the company will get lower and lower and in the end no
one will want to buy any apartment even if they build soundproof building ,
because it is very hard to regain peoples trust
2)security – the design process must involve multiple access
points , because you don’t want commercial part users to be mixed with
3)smell isolation – restaurants can produce a lot of garbage
and unpleasant smell , when there is enough space this does not cause problem,
but in this matter especially during warm days if the garbage bin is not
properly placed far away from someone’s personal space it will cause
devastating effect so for the company it is much better to spend some money to
plan everything accordingly beforehand ,than damage their name because of
something so simple, this is perfect example why it is important to think about
even little details.
4)limitations – for the company for example the more stages
you build the more you sell and your profit also increases ,but no one will
allow you to build a 15 stage building in the middle of a historic neighborhood
of little houses and this is just one example of limits. The more free you are
the less money you have to spend to adjust to the rules
5)not enough space – the biggest challenge for mixed
development is space, you cant build a house if you can not provide proper
parking place for the residents , this costs company a lot of money but not
building one will have even more severe money issues.
6) most important challenge is that mixed developments one
of the best sides is everything is near and all four important key places : home
, workplace , recreation points and commercial areas are close and the best
part in HS2 is making distance shorter , this means RCL wont benefit from one of the best parts of HS2 ,but still there
are plenty more .
Why would Richard construction limited benefit from
investment in mixed development in Birmingham
1)HS2 will provide better transportation which will increase
the demand in Birmingham
2)HS2 will create more jobs ,which in turn increase the need
for renting or buying accommodation
3)The fact that it will be easier to get to Birmingham
from London and vice versa will increase the
prices of building in Birmingham
, so now is the perfect time to invest
1)health promotion – everything is in walking distance
,which in turn provides you with opportunity to walk instead of using car,
train or any other vehicles
2)people don’t have to worry about always being late ,
because everything is nearby
1)less use of vehicles results in cleaner air
2)it is more compact , so you use less space and leave more
space for environment ,this is also good for company name.
project it is important to manage stakeholders properly in this case first we
must start with asking questions like:
1)who will be affected ?
In most cases it is neighboring buildings and commercial
2)how will they be affected by the work?
Residents are easier to deal with most of the problems they
will have is complains about either sound or dirt , places like restaurants may
sue our company if we will be reason of their client loss.
3)will they be
supportive, ambivalent or oppose?
In most cases and probably in this one also they will oppose
, because they don’t see why would they benefit from it
4)is any outer party influencing stakeholders ?
Sometimes problems are created artificially reasons can vary
but main point is to find cause quickly, after that it is easier to deal with.
5)who would be the conductor between stakeholders and our
It is very important to choose the right person ,because it
is one of the hardest jobs.
If you will have all the answers it is easy to create a “map”
of stakeholders and manage them properly without any complications.
What should Richard construction limited do before investing
1)Create good team for the task and find out how much it
will cost to maintain it:
A)They must have shared goal which is transparent for them
B)They must respect each other
C)there should be minimal cultural issues because it makes
difficult to communicate and trust eachother
D)Regular monitoring and evaluation is crucial
Examination of practical implications of the investment that
Richard Construction Limited must consider before deciding on the investment
(eg: team working , motivations)