Government indecision on HS2 was likely a given in the minds of contractors, Liberum analysts have said, with clarity on the project - when it comes - likely to spell upsides.
Despite the speculation being that Rishi Sunak will soon scrap the northern leg of the project to Manchester, Liberum said, citing a Times report, reaffirmed plans for a terminal at London Euston will likely see the announcement mark good news for the sector.
“Prudent companies always expect a degree of dithering and delay from government,” Liberum said.
As a result, Kier Group PLC (LSE:KIE) and Costain Group PLC (LSE:COST) - though most exposed to the project - do not face material downsides from the Manchester leg being scrapped.
In fact, Costain sits alongside Severfield-Rowen plc (LSE:SFR) as among those most likely to benefit from the green light being given to the Euston part of the project.
Given work is yet to peak on the project, with the London to Birmingham section already having been started, impacts to Kier will be unlikely to kick in for several years yet.
Balfour Beatty plc (LSE:BBY) is also yet to see its workload on the project peak meanwhile, Liberum said, again meaning any changes will be unlikely to deal a large blow.
“The problem is that inflation, which is particularly marked in building materials, is increasing the cost,” the investment bank noted.
“Delays in an inflationary environment only increase the cost further.”
This does indeed mark bad news for the taxpayer, Liberum added, which will bear overrunning costs. But for contractors, it's a different story.
“The HS2 rephasing could result in an opportunity if the programme goes on for longer than originally planned given it is a cost-plus contact,” the bank said.