27/08/2013 05:05 BST | Updated 27/08/2013 09:52 BST

HS2 'Not Worth The Money', Businesses Warn

Britain's Prime Minister David Cameron (2nd right) and Transport Secretary Patrick McLoughlin (2nd left) travel by train to a regional cabinet meeting in Leeds.

The coalition has come under renewed pressure to abandon its controversial High Speed Rail 2 project, as research reveals businesses are deeply opposed to the plans.

In a survey of 1,323 firms by the Institute of Directors, just 27% said the HS2 scheme represented good value for money and 70% said the scheme would not help the productivity of their business.

This comes days after the massive rail project was branded "foolish" by former chancellor Alistair Darling, who warned that its economic benefits were "highly contentious".

Despite Transport Secretary Patrick McLoughlin telling MPs in June that the scheme would cost an estimated £50bn, other reports suggest it could be far higher.

An Institute of Economic Affairs report indicated the cost could reach as high as £80 billion while the Treasury is said to be expecting a figure of £73 billion.

IoD director-general Simon Walker said: “Businesses up and down the country know value for money when they see it, and our research shows that they don’t see it in the Government’s case for HS2.

“It is time for the Government to look at a thousand smaller projects instead of falling for one grand folly.”

The Institute for Directors chief called for the coalition to divert their resources away from backing the Y-shaped high-speed rail network linking London, the Midlands and the North towards other rail projects.

“The money would be far better spent elsewhere and in a way that will benefit much more of the country. Investment in the West and East Coast main lines combined with a variety of other infrastructure projects would be a far more sensible option.

The business group's attack comes after former business secretary Lord Mandelson warned that HS2 was an "expensive mistake" that would be "damaging to the northern regions".

Alongside this, the Labour Party has suggested it could delay the construction of HS2 in order to redesign its route through north London.

Transport Minister Norman Baker said: "This is not an economic analysis by the IoD. It is a survey of less than 4% of its members who have responded to some of the misleading reports of late.

"The IoD is simply not aware of the facts. It says we should be investing more in the existing rail network. We are spending £37 billion on this in the next five-year period, undertaking the biggest investment since Victorian times."