The Elizabeth Line: a white elephant in the making?
Covid, 'Levelling Up', Brexit, Inflation and what this means for infrastructure in London and Britain in 2022
Crossrail is finally here.
On the 24th May, the new East-West Tube line across London opened to much fanfare, with Londoners flocking to the shiny, new stations in the city centre.
However, underneath the excitement surrounding the new line, a number of challenges face the project now that it has finally been completed, four years late. These challenges raise the question over whether or not the line is worth the cost: £4 billion over budget at £18.9 billion. If the benefits of Crossrail do not outweigh this large cost, then it may become what is often called a ‘White Elephant’; an infrastructure project which fails to provide a return on its significant investment.
There are a range of both macroeconomic and social factors which may result in the Elizabeth Line not providing the multiplier effect desired by Transport for London, London’s government and the British government. However, it is interesting to understand what Crossrail’s fate may be, not only for the fate of transport in cities, but the fate of cities as a whole in the post-pandemic era of working from home.
Is there demand for Crossrail post-Covid:
The coronavirus pandemic resulted in work patterns changing, with more people working from home to avoid infection. Globally, we are now experiencing a sustained recovery from the pandemic at last, with life in Western countries largely returning to normal. However, the legacy on working patterns is now becoming apparent:
Work from home appears to be developing from a short-term trend into perhaps the key long-term legacy of the pandemic. As city centres rely heavily on the service sector of the economy, in which workers mainly toil in offices, this has led to a decrease in footfall in these city centres on work days. This decrease in footfall due to work from home meaning that less commuters are coming to cities has been particularly acute in London. On the 19th May, an article on ‘The future of public transport in Britain’ by The Economist stated that “The Tube is about three-quarters as busy as it was before covid-19 hit”.
This 3/4 statistic has remained constant over recent months following an initial resurgence in Tube usage after the lifting of coronavirus restrictions in early 2022. Therefore, it is now apparent that working from home is not going away in the case of London and that workers who are able to do so, particularly in high earning office jobs; in the finance industry in particular in London, are choosing to stay at home as opposed to return to the office. What was initially viewed as a short-term legacy of the lockdowns has now transformed into a clear trend of less working in offices.
This poses a significant challenge to the success of the Elizabeth Line as the project was predicated on London’s public transport experiencing increasing demand, with supply from existing Tube lines being unable to keep pace. This is due to the project originally being conceived in 2002, a period in which the British economy was growing at a stable rate of 2.1%; largely driven by the pre-2008 financial sector. This particularly benefited London’s economy and cemented the attraction of the city to young, ambitious graduates and immigrants. This led to an increase in demand for travel, which was sustained post-2008 even despite the restrictions on the financial industry as a condition of the bailout; the industry was still robust but the peaks of the 2000s would not be reached in the 2010s. The think-tank Centre for Cities said in 2013 that tube journeys had grown by 40% since 1997 and 14% since 2007. Therefore, demand for tube travel was exceeding the capacity of the existing network. This meant that policymakers in the central government, local government in London and Transport for London realised that more infrastructure was required for London’s growth to be sustained, otherwise pressure on the existing network would increase and ticket prices would likely have to increase to fund the higher costs of staff and maintenance needed to prevent this pressure on the network from causing its collapse. The flagship project in this increasing of capacity was Crossrail, championed in particular by Mayor of London from 2008 to 2016: Boris Johnson.
However, the need for this increase in capacity is dependant on the level of demand for travel in Central London. However, as already argued, this demand for travel has decreased. This particularly affects Crossrail as it extends to Reading to the West and Shenfield and Abbey Wood in the East. Therefore, a key intent of the scheme is to provide a new route for commuters from suburbs as opposed to within the city centre. These commuters are exactly the demographic which are choosing to continue to work from home: ‘white collar’ workers in office jobs in the tertiary or quaternary sectors.
Therefore, the high investment in the project was only provided due to a desire by policymakers to increase transport capacity in an ever-growing London. However, this growth, which once seemed infinite, has been brought to an end by the pandemic. Therefore, demand for tube travel appears unlikely to recover in the future as it goes hand-in-hand with demand for demand from commuters for access to Central London. Hence, the likelihood of the £18.9 billion project yielding a return appears unlikely.
This failure to provide a return on investment for TfL will only be exacerbated by the current macroeconomic circumstances and the present state of TfL’s finances- even without the cost of the new line.
The pandemic, with the already discussed decrease in Tube usage and hence revenue from ticket sales, has meant that Transport for London has faced financial difficulties and a £5 billion bailout from the central government has been required.
Britain is currently facing a significant macroeconomic challenge with inflation at 9%, and falling business confidence and hence investment due to Brexit, the aforementioned inflation, and the possibility of interest rate rises. Chancellor Rishi Sunak’s decision to inject over £30 billion into the economy this week is only likely to demand-pull inflation in the economy, as the initial inflation’s root cause is the injection of higher government spending into the economy by the government during 2020 via schemes such as furlough. Therefore, it is likely that the British economy will experience a period of stagflation for the foreseeable future. Households attempting to reduce their costs during this period are likely to reduce travel, especially if working from home means it is not necessary.
In addition, uncertainty remains over what the long-term economic consequences of Brexit will be. This particularly effects the financial industry which London, and by extension the Tube, is highly reliant on. According to Reuters, 7,600 financial services jobs had been relocated out of London due to Brexit as of May 2021. This may further drain demand for travel within London.
Therefore, as demand for the line is low and Transport for London cannot afford the high cost, questions must be raised over what the future of the project will hold. If demand for travel remains subdued in London in the long-term it is likely that the project will not reach capacity for the foreseeable future and therefore will not yield a return on its significant investment. Therefore, as the line overall does not provide a significant improvement to the economy of London and Britain as a whole, despite its large investment, the project can be called a ‘White Elephant’.
What could make the project worth the investment?:
A recovery in demand for travel in London is based on the assumption that the current increase in working from home eventually subsides and demand from commuters for travel in Central London returns to pre-Covid levels, the level of demand which the line was designed conceived to accommodate. However, the previously mentioned 75% of pre-Covid Tube usage has remained constant over recent months; indicating that working from home remains attractive to London’s workers. Therefore, demand is unlikely to increase for the Elizabeth line in the long-run.
However, the line may provide a return on investment if it emerges as an alternative to existing infrastructure; thereby converting usage for this infrastructure to the new line. This is the case for the Elizabeth Line as it extends to Reading in the West and Abbey Wood in the East for example. As these stops lie on existing National Rail lines, they may potentially be able to capture passengers from these lines.
However, as the National Rail lines are faster than the Elizabeth Line; speed being likely being the key trait in travel that commuters look for, this is unlikely. Furthermore, having the same number of commuters in total being distributed over a different number of options does not change the total performance of infrastructure for the government. Hence, the project is still not currently deserving of the investment.
Open just in time for the Jubilee: Coincidence or has the opening been rushed after years of delays?
This weekend, Britain celebrates the Platinum Jubilee of Queen Elizabeth II. This raises the question over whether the opening of line has been rushed so that it is open in time for the celebrations; making for an excellent PR opportunity for the Mayor of London and the Prime Minister in a period which can arguably be called a national crisis- with record inflation, a bleak economic future and a potential new threat in the form of Monkeypox.
The fact that the line, until autumn 2022, will not be fully integrated from East to West and requires passengers to change at several points to go the line’s entire distance, indicates that it is not entirely ready and that the opening has been brought forward in order to honour its namesake at her Jubilee.
This raises the possibility that the infrastructure now in use is not fully ready and could malfunction; causing delays which would further reduce the positive short-term impact of the line. Despite the opening of the line working perfectly, early teething problems could yet arise.
The key indicator that the opening has been rushed is that, after years of delays, it was announced to open on the 4th of May, just under three weeks before the opening date of the 24th. The sudden announcement shows uncertainty over whether or not the project would be able to open so soon.
What this means for policymakers:
1. How will the project be funded?
The funding for the line appears largely secured according to the above diagram. However, some contributions come from TfL. As the revenues of TfL are dependant on ticket sales, which are in turn dependant on Tube usage, this funding may not be gained due to, as already discussed, usage of the Tube decreasing following the pandemic, and ticket revenues with it.
This means that significant funding must come from Britain’s central government. This raises interesting questions over…
2. Levelling Up
The government of Boris Johnson, who whilst Mayor of London and today as Prime Minister supported crossrail, has been highly focused on ‘levelling up’ Great Britain, reducing the economic inequality between the South and the North of the country. This is due to a key reason for his victory in the 2019 General Election being the Conservatives winning seats previously thought impossible for them to win in the ‘Red Wall’ of the de-industrialised North of England.
In order to continue this new-found support into the next General Election, Johnson has committed to investing in the North of the country as outlined by the levelling up white paper published in February 2022. These plans include a focus on infrastructure investment, designed to entice businesses to the North and increase the productivity of its population; thereby reducing the inequality with the more productive South East of England.
The Elizabeth Line clearly clashes with this policy objective. Spending £18.8 billion into the region which levelling-up is designed to increase parity with indicates that the government is not as focused on reducing regional inequality as its campaigning makes out. The line, and Johnson’s continued support for it, shows that the government is still focused largely on London as the economic centre of the country.
This continued support is shown by Johnson supporting the construction of Crossrail 2, a proposed line travelling from South to North across London; adding even more capacity and investment to transport in London. As this project, like the original Crossrail, will take billions in investment and many years to complete, the government shows that in the long-term its focus is still on London. This contrasts HS2, a high-speed rail link designed to level up Britain by reducing travel times between London and the North; which had the Leeds branch of the line scrapped last year. Therefore, as the government appears to be scaling back investment in ‘levelling up’ whilst increasing focus on London’s infrastructure, questions are raised over whether or not the government has the ability to reduce inter-regional inequality.
Conclusion:
The future of cities is arguably the biggest question facing our species at the moment. Since the Industrial Revolution they have been the centre of civilisation in Western societies; a change in this with the population becoming less centralised in inner cities would represent a complete transformation in how we work, where economic power is concentrated and how we interact with each other. De-urbanisation due to working from home would be the most significant legacy of the pandemic should this be the case.
The Elizabeth Line can only be worth the investment in it if the capacity it adds to London’s transport network is necessary. Currently the capacity looks unnecessary given the current trends in work.
Therefore, the line is likely going to go under-utilised and as such will do little to improve the underlying economic performance of London, the raison d’être of the project. Instead it will leave a legacy of cost, delays, a potentially rushed opening and a clash with the key policy aim of the current government.
As its huge investment will do little to actually improve London’s economic performance, we can call the Elizabeth Line a ‘White Elephant’.