HS2 Ltd, the taxpayer-owned company building Britain’s new high-speed rail line, has scrapped a key contract amid allegations of conflicts of interest.

The US engineering firm CH2M has announced it will hand back a £170m contract to design the second phase of the £56bn HS2 — extending the London-Birmingham link on to Manchester and building a branch from the Midlands to Leeds.

Mace, an engineering firm that lost its bid for that contract, had threatened legal action after pointing out that HS2’s new chief executive, Mark Thurston, was a former CH2M employee. So was his predecessor, Roy Hill, who filled the role on a temporary basis.

In a statement, CH2M said: “CH2M today provided formal notice to Hs2 Ltd that we are withdrawing our interest in the Hs2 Phase 2b contract.

“CH2M has demonstrated all appropriate measures taken throughout to ensure the integrity of the procurement process. Notwithstanding these efforts, we have taken the decision to alleviate any further delays to this critical national infrastructure project which could ultimately lead to increasing costs to UK taxpayers, as well as to our firm.”

CH2M, which is also delivering London’s new Crossrail train line and the capital’s new sewer, has said it has become frustrated with the Department for Transport and HS2’s slow pace of progress in resolving the issues.

The wrangle has already postponed work on the second phase of the project by more than a month and will cause further delays as the contract is re-tendered.

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