High Speed 2, known as HS2, could cost as much as £80bn when it is completed (Reuters)

High Speed 2, the government-backed rail project that would slash the journey time between London and Birmingham by 35 minutes, has been dismissed as a "grand folly" by a leading business lobby group.

The Institute of Directors (IoD) said a survey of 1,323 of its members showed that just 27% thought HS2 would bring value for money, while 40% said it would be important to their firms - a fall of 14% on a previous poll.

Government estimates put the project's total cost at £42.6bn, but one projection by the Institute of Economic Affairs (IEA), a thinktank, predicts the bill will hit £80bn.

"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," said Simon Walker, director general of the IoD.

"Overall there appears to be little enthusiasm amongst IoD members, not even in the regions where the benefits are supposed to be strongest.

"We agree with the need for key infrastructure spending, but the business case for HS2 simply is not there. It is time for the government to look at a thousand smaller projects instead of falling for one grand folly."

On the proposed HS2 network, trains would be able to hit speeds of up to 250mph. According to the HS2 website, this would cut journey times from London to Birmingham from 84minutes to 49. It would also cut the journey time from the capital to York from 113 to 83 minutes, to Liverpool from 128 to 96 minutes, and to Edinburgh from 263 to 218 minutes.

Work on the London-Birmingham link will not be complete until 2026 on the current timetable.

The government claims that there are significant economic benefits to be reaped by speeding up the links between major UK cities, but critics say the cuts to journey times are not enough and the travel cost of using the network will be too high.

Alison Munro, chief executive of HS2, insisted that the project was the only way to alleviate the pressure of more passengers using the country's full rail network.

"There are after all only so many trains you can fit into a section of track and the East Coast and West Coast main lines are virtually full already," Munro told Reuters.

"There is no other alternative that delivers the benefits of HS2."

As well as question marks over the funding and economic benefits of HS2, the government is also facing criticism from local communities who would have the rail network run through or nearby them.