Shropshire Council’s planned Shrewsbury North West Relief Road (NWRR) is now projected to cost £215m, leaving a funding gap of £176m and potential sunk costs of £39m, posing ‘very significant financial implications’ if it is abandoned.
The NWRR comprises two separate road schemes – the one-mile Oxon Link Road (OLR) and the four-mile NWRR itself – which the councils has combined into one overall project ‘for efficiency and practical delivery reasons’.
A medium-term financial strategy report to its full council on Thursday (27 February) gives the current predicted cost for the whole scheme as £215m, including £53m for the OLR, which the council said it could still progress if the NWRR element were cancelled.
In a press release, the highway authority set out various funding ‘scenarios’ for the scheme, including some under which the scheme is not progressed that it said ‘could have very significant financial implications for the council’.
It said that by April, the scheme will have had '£39m spent on it' – so-called sunk costs. The council has continued to present the unfunded scheme as viable, in part so that it does not have to pick up the tab for this spending.
It said the ‘scenarios’, which make assumptions using established practice, ‘are clear that if the scheme does not progress due to a decision that the Government makes’, the Government would meet the £39m but if the council decided not to progress the scheme, it would need to repay the £39m to Government.
‘If the council has to fund the £39m “sunk costs” bill, this would immediately create a new revenue pressure on the council’s budget for day-to-day services, on top of the £22m of new savings that need to be found next year due to a range of budget pressures.’
Identifying a funding gap of £176m, the council cited as possible funding sources a combination of 'confirmed' Local Transport Fund (LTF) government funding, Community Infrastructure Levy and other grant sources, and/or borrowing through Public Works Loan Board.
Although the council appears to have placed its hopes on using some or all of the £136m of the LTF cash pledged by the previous government, said to derive from redirected HS2 funding, transport secretary Heidi Alexander has described the LTF as ‘fantasy money’.
Gwilym Butler, the council’s cabinet lead for finance, said: ‘The best-case scenario is of course that the Government meets the scheme’s full costs as a previous UK Government secretary of state had committed to because of the huge benefit the scheme would bring for local people and business in Shropshire as well as the direct impact the scheme will have on the Government’s wider drive for growth.’
This is a reference to a pledge from Tory transport secretary Mark Harper in Autumn 2023 to ‘fully fund’ the scheme with redirected HS2 cash, which the council has repeatedly claimed it could rely on.
However, a report from its auditors late last year described this approach as ‘speculation’, noting that the statements were never given in writing, that there has since been a change of government and that the Government had only formally pledged £54.4m (under the Large Local Majors funding stream).
The auditors’ report was equally sceptical about the council’s latest plan to use LTF cash and warned that the abortive costs of the scheme, which it placed at £23m, ‘could seriously impact the Council’s financial sustainability’.
Mike Streetly of Better Shrewsbury Transport, which opposes the road, said the £215m estimate is 'already months out of date' and warned that 'with inflationary pressure mounting and complicated construction work including a viaduct over the River Severn likely to result in overrun costs, there is no upper limit on how much this road could end up costing'.
He added: 'The old adage is true: when in a hole, the first thing you should do is stop digging. But the near-bankrupt council still isn’t listening, even though there remains huge financial risk.'
As the council meeting took place, the council published a long-promised full business case (FBC) for the scheme, albeit a draft dated November 2024, which it said would need to be updated and approved by the full council before submission to the DfT for funding.
It said the FBC ‘confirms the powerful case for building the NWRR, despite the rise in costs of delivery due to inflation’ and confirms that the scheme would deliver an Adjusted Benefit to Cost Ratio (BCR) score of 3.88.
Mr Streetly said: ‘It’s no wonder the council didn’t want to release the Full Business Case earlier, because it’s a total work of fiction. It’s riddled with so much misinformation it would make Donald Trump blush.'
He highlighted the fact that the BCR in the FBC was based on a lower cost (£163m) than the most recent estimate.
The council has not published a funding plan for the scheme and has repeatedly failed to clarify whether it has produced one.
In December last year, its own external auditors recommended that it produce a funding plan ‘as a matter of urgency’.
The council’s cabinet member for highways, Dan Morris, has previously claimed that the auditors’ report had ‘required no further actions.’
A council spokesperson told Highways that Cllr Morris was making the point ‘that he had been provided with assurances from the officers managing the NWRR project that the recommendations as set out in the [auditors’] report had already been implemented’.
In the absence of a funding plan, Cllr Morris’ claim would have been untrue, even if retrospectively re-interpreted to describe subsequent compliance with recommendations, rather than an absence of recommendations, as Cllr Morris originally implied.
