Stockholm's new subway now costs almost SEK 100 billion - 30 percent over budget

The final cost for the construction of the new subway will land at just under SEK 100 billion - an increase of around 30 percent compared to existing funding. This is shown by the administration's new forecast, which was presented at the end of last week. The result per kilometer is a cost of SEK 3.3 billion on average.

But the question is how expensive is it, really?

Alon Levy is part of a group of researchers at the NYU Marron Institute studying subway construction around the world. She believes that Sweden has historically stood out with very low costs compared to other countries in the Western world.

- The subway expansion in Stockholm from the 1950s to the 1970s cost around SEK 660 million per kilometer in today's money value. It was extremely cheap. Sweden was unique compared to most other European countries, says Alon Levy.

Since then, construction costs have risen significantly faster than inflation. Levy assesses that the new subway, including the latest price increase, is roughly on par with the global average for similar projects.

- The cost has risen, but from low levels. If it continues to rise further, it is bad, but if it can be kept at this level, it is okay, he says.

Alon Levy highlights several southern European countries that now build subways significantly cheaper than Sweden. For example, the ongoing expansion of Milan's subway is expected to cost around SEK 1.5 billion per kilometer and in Madrid the cost is just over a billion.

- Northern Europe tends to look down on Southern Europe, which is bad, because there is a lot to learn from them, says the researcher.

It is all the more expensive in the Anglo-Saxon countries. The extension of the Northern Line in London, which opened in 2021, had a kilometer cost of around SEK 5 billion. The horror example is New York, where phase two of the Second Avenue Subway is expected to cost around SEK 26 billion per kilometer to build according to the Marron Institute's forecast.

- Stockholm's new subway is about eight times cheaper per kilometer than in New York, notes Alon Levy.

How is that possible? According to the researcher, it is, among other things, that these countries have a culture of outsourcing a greater part of planning and implementation to private actors who act on a global market.

- When they are finished with the construction, they take the knowledge with them to Singapore or Hong Kong, instead of being able to benefit from it in the next project in the country.

That large infrastructure projects exceed the budget is more the rule than the exception, for which the National Audit Office has criticized the Swedish Transport Administration. In the case of the new subway, it is, among other things, that the parties did not take account of future risks in the original agreements, according to the regional board.

However, the question of how much should be set aside for potential price increases is not entirely uncontroversial, according to Alon Levy. One of the explanations for why it is so much more expensive to build in the USA is that there is a requirement for a 40 percent risk reserve in every project.

- If you don't include risk in the budget, you can get large overdrafts, like in Stockholm. But if you include risk, you're guaranteed to get it, he says.

This is because everyone involved in the project then knows that there is money set aside, according to Alon Levy.

- If you have a 40 percent allowance for risk in the budget, 35 percent will be spent, because entrepreneurs and other stakeholders know that the money is there. Then the head of the authority can say "look, I came in 5 percent under budget. I'm good at my job".