A think tank’s recommendation to scrap the controversial HS2 project has been met with short shift by business leaders in the North.

Free market think tank the Adam Smith Institute said branded HS2 “a massive white elephant” and instead called on investments to be made on the existing railway network, including northern sections of the West Coast Mainline.

The Institute dismissed HS2 as “a product of political thinking, poor management and overly complex design”, with the project returning 78p of value for every £1 of taxpayers’ money spent.

It also highlights that a number of key cities, including Carlisle and Lancaster, will lose direct trains to London if HS2 is delivered.

The report comes after the Government commissioned the Oakervee inquiry to probe the benefits, impacts, affordability, efficiency, deliverability, scope and phasing of HS2 – an inquiry that both the Northern Powerhouse Partnership (NPP) and Transport for the North (TfN) are to feed into.

The NPP – which will submit the findings of its independent review next week – has blasted the Institute’s proposed way forward and repeated demands for both HS2 and the £39 billion Northern Powerhouse Rail project to be built in full to help reinvigorate the region’s economy.

Sir Howard Bernstein, a member of the Northern Powerhouse Independent Panel Review into HS2, said: “Just because this commentator thinks this is a poorly managed project does not mean it’s essential purpose is wrong.

“His solution however is so typical of the professional or expert establishment largely based in South East. Give them some capacity uplift by modernising a few junctions. Just like West Coast Main Line several years ago. Years of misery for a marginal benefit.

“Sorry this won’t do - the North deserves better and will continue to campaign to ensure we secure a proper share of national resources and meet our ambitions so that we achieve our full economic potential.”

NPP director, Henri Murison, added: “The North is not going to stand for cancelling HS2 in order to pay for a list of schemes which go nowhere near increasing capacity to the extent we need, and certainly don’t address the challenges of travelling between the Midlands and the North.”

The author of the Adam Smith Institute paper, rail export Adrian Quine, said HS2 had become “the most out of control project of our generation”.

He believes capacity can be increased by improving existing lines and bottleneck junctions, reopening old lines and in some cases constructing new sections of conventional high speed railway – and all for well under the projected £106 billion price tag for HS2.

“So much can be achieved with our existing network rather than applying an HS2 sledgehammer to crack a nut,” he added.

A similar approach to HS2 was put forward by the Taxpayer’s Alliance. It recommended scrapping HS2 and instead spending the money on 28 alternative projects which, locally, included a £30m upgrade of the Carlisle to Settle line and a £110m reinstatement of the Keswick to Penrith railway.

Business leaders in Cumbria have pledged their support for HS2, but on the condition that trains stop in the county.

Under current proposals trains would pass through the county on the way to Glasgow on the western leg of HS2 network, forcing passengers to change at Preston to travel on to Cumbria.

Cumbria Chamber of Commerce has demanded that HS2 trains observe the current West Coast Mainline stop pattern in Cumbria and stop at Oxenholme The Lake District, Penrith and Carlisle stations.