Executive Summary IntroductionRichard Construction Limited is considering to invest in Birmingham mixeddevelopment (residential and commercial) due to hs2 project. In this report weare going to discuss 4 topics 1)overview of HS22)West Midland economy prosand cons caused by HS23)Challenges and benefits of mixed development for Richard constructionlimited4) Examination of practical implications of the investmentthat Richard Construction Limited must consider before deciding on theinvestmentAfter 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 ofnew high-speed railway in UKdidn’t appear out of thin air , many factors like:1) Therise in Long distance passenger demand (as shown in graph 1) Graph 1(source www.gov.uk) 2) Theroad system becoming crowded with limited ability to keep increasing capacity.
offering high-speed rail will encourage more people to travel by trainrelieving gridlock in city centres3) Investmentwill provide jobs for those involved in building and running the new HS24) High-speedrail will take travel away from short distance air-travel , leaving a lowercarbon footprint.5) Shorteningtime 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 creatingcompany HS2 LTD to build it.
HS2 is a new high speed railway line under development by UK department of transport, which will connectLondon Birmingham Manchester and Leeds and hastwo phases :1) London (Euston train station) and Birmingham(Curzon train station) , scheduled to commence in 2017 to be ready for theopening to passengers in 2026Line length – 140 miles (225km)Cost – around £22bn ($30bn)2) Manchester and Leeds Line length – 190 miles (306km)Cost – around £20.6bn ($28.6bn)The route is also referred to asthe Y network since it is roughly in the shape of the letter Y.
It is one ofthe most substantial transport infrastructure projects ever built in the UK. The project will provide vitaltransportation 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 createeconomic benefits and thousands of jobs. The HS2 will be operated withhigh-speed only trains and classic compatible trains offering higher seatingcapacities, to serve the large volumes of passengers arriving at the same time.High-speedonly trains operate only on high-speed tracks, while classic compatible trainsrun on high-speed and existing tracks.
High-speed trains will run at a speedof 225 miles an hour (mph). Each unit will have a length of 200m and thecapacity to carry 1,100 passengers.Two vehicles can be joined together foroperating during peak times. High-speed trains will require different types ofstations, offering a platform height of 760mm. Involved contractors by 2012 :1) CH2M Hill was appointed as a development partner to provideengineering, design and environmental assistance for the HS2 project, inJanuary 2012.2) InMarch 2012, HS2 contracted the ERM Temple Group Mott MacDonald Consortium,Atkins and Arup to undertake environmental impact assessments (EIAs) for theproject.
3) InApril 2012, HS2 placed contracts with Mott Macdonald, Atkins, Capita SymondsIneco JV and Arup for designing various segments along the high speed line.4) InMay 2012, Parsons Brinckerhoff was awarded contracts to design high speed railsystems for the first phase of the project and to deliver design changes on thepresent Network Rail systems at major interface points, to allow theconstruction of HS2 Is it goodfor Stakeholders?On one hand :1) amount ofjobs increase(according to www.gov.uk 14 000new jobs will be created and 600,000 square metres of new employment floorspace2) a lot ofcompanies/people benefit (selling lands/winning tenders during redevelopment ofover 140 hectares of land ) 3)it willprovide space for 2000 new homes4) contribute1.3 billion pounds a year to the local economy (HS1 provides £300m boost to Kenteconomy in first decade of service)5) increasein tourism (means more money for everyone in the area)6) The northern cities served by the newline, which will be better connected to each other and to the south of England willbenefit. On the otherhand:1) Places further away from the line, like Wales, aren’texpected to see any economic benefits and could losejobs as a result2)The Wildlife Trusts say both phases directly affectnature reserves and wildlife sites which could lead to a net loss inbiodiversity 3)The Chilterns, Buckinghamshire andOxfordshire – here, historic buildings are at risk of damage or demolition, andremaining residents will face noise pollution4) Some residents in Mexborough, South Yorkshire, will lose their homes.
Sixteen of 216 homes on a housingestate 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 Estatewill 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 forWMM(west midland metropolitan) is approximately 1.5 billion pounds in 2026, andworkplace base employment The table below shows the impacts on residence – basedemployment, average wages and GVA by sub-region.
Graph 5 (source KPMG analysis) Economic impacts of an HS link from London to BirminghamOnly The impact of High Speed services between Birmingham andLondon have been tested in isolation, to determine the contribution they wouldmake to the initial HS2 + regional rail enhancements scenario. The High Speedlink will impact on connectivity levels for places that will gain an improveddirect or connecting service to LondonGraph 6 (source KPMG analysis) Total annual workplace GVA impact to forthe West Midlands Metropolitan Area with a high speed line to London is estimated at 600 million pounds in2026, with a growth in workplace employment of 10,000 . The majority ofbenefits come from increased business-to-business connections . This is alittle less than half the benefit measured in the HS2+ regional railenhancements scenario. The majority of benefits are withing Birmingham.Graph 7 (source KPMG analysis)Fiscal implicationsUsing Treasury ‘green book’ appraisal guidance andproductivity impacts in the West Midlands, the net national tax revenuegenerated 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 increasewould be only £2.7bn. To sum up :1)HS2 combined with RRSE will boost the west midlandseconomy , creating 22 000 permanent jobs and 1,5 bn pounds impact on GVA by the2026.
2) HS2 between London and Birmingham without extraregional enhancements would deliver less than half those benefits. 3)A stronger WM economy as a result of HS2,and complimentaryrail improvements , would generate tax revenue of some 6.4 bn pounds. Thiscould finance new and improved infrastructure.Additional benefits may include:a) Publictransport will have more usersb) improvedlocal air quality caused by fall in carbon emissionc) peoplewill have easier way to go to workd) onall roads national or local congestion will be reduced all this is why it is positive for West midlands , lets talkabout why it may be negative 1)First there area lot of projects which will cost much less and in the end produce highergrowth of west midland economy and most of them don’t need such a long periodof time to finish.
2)All theforecasts that there will be high demand doesn’t necessarily mean there will beone 3)it will beeasier to work far away so qualified workers may change their jobs and find onein cities like London 4) for peopleinvolved in construction industry it will be harder to find workforce ,becausemost of them will be involved in the hs2project 5) price ofelectricity may rise because of increased need There are several challenges that the company must overcometo be successful in mixed development , these include:1)isolation of sound – it is very important for everyresident, even through they know big city is not a place where you can livequite life , not to hear irritating sounds that in this case may come fromrestaurant , bar or any other place which is nearby . this means that thecompany will have to spend more money to make it comfortable for clients orelse public figure of the company will get lower and lower and in the end noone will want to buy any apartment even if they build soundproof building ,because it is very hard to regain peoples trust2)security – the design process must involve multiple accesspoints , because you don’t want commercial part users to be mixed withresidents 3)smell isolation – restaurants can produce a lot of garbageand 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 notproperly placed far away from someone’s personal space it will causedevastating effect so for the company it is much better to spend some money toplan everything accordingly beforehand ,than damage their name because ofsomething so simple, this is perfect example why it is important to think abouteven little details.4)limitations – for the company for example the more stagesyou build the more you sell and your profit also increases ,but no one willallow you to build a 15 stage building in the middle of a historic neighborhoodof little houses and this is just one example of limits.
The more free you arethe less money you have to spend to adjust to the rules 5)not enough space – the biggest challenge for mixeddevelopment is space, you cant build a house if you can not provide properparking place for the residents , this costs company a lot of money but notbuilding one will have even more severe money issues.6) most important challenge is that mixed developments oneof the best sides is everything is near and all four important key places : home, workplace , recreation points and commercial areas are close and the bestpart in HS2 is making distance shorter , this means RCL wont benefit from one of the best parts of HS2 ,but still thereare plenty more . Why would Richard construction limited benefit frominvestment in mixed development in Birmingham 1)HS2 will provide better transportation which will increasethe demand in Birmingham2) Examination of practical implications of the investment thatRichard Construction Limited must consider before deciding on the investment(eg: team working , motivations) ConclusionReferencewww.gov.ukhttps://www.home.kpmg.com/uk