Building HS2 all the way to London Euston and Crewe could save the government money by enabling it to lease the line out for much more, rail industry leaders have told ministers, as the Treasury weighs up whether to fund tunnels to central London.

The High Speed Rail Group proposes selling the rights to run the line as a long-term concession – on a similar basis to the HS1 rail route linking the capital to the Channel tunnel.

Such a concession would be worth about £20bn if fully developed from central London and joining lines to northern cities, but just a fraction of that under current plans to terminate at Old Oak Common and Birmingham, according to an analysis for HSRG.

The coalition of rail and engineering companies, whose members include Hitachi, Alstom, Siemens and Avanti West Coast, argues that spending billions more now to reach Euston and Crewe would still save the Treasury £3.5bn in the long run.

The claims come as the government decides whether to reinstate tunnelling work to Euston, at a critical juncture in construction. Two giant tunnel-boring machines from Germany are still being installed at Old Oak Common despite the last government suspending wider works, after construction contractors warned that it would be hugely more costly and difficult to contemplate tunnelling once the west London station was completed.

While the transport secretary, Louise Haigh, has indicated the government wants to ensure HS2 reaches into central London, the chancellor, Rachel Reeves, has also asked ministers to draw up billions of pounds’ worth of infrastructure cuts.

According to some reports, Reeves is nonetheless planning to announce guarantees for HS2 to Euston in the 30 October budget. However, the funding mechanism is not clear, with Labour having said it would not overturn Rishi Sunak’s shock axing of HS2’s construction into central London and north of Birmingham last October.

Although Labour has pledged to nationalise train operating companies, it has also wooed private investors to potentially build more infrastructure.

HS1 was sold by the government in 2010 for £2.1bn as a 30-year concession to two Canadian pension funds, which resold the rights to other private equity investors in 2017 for £3bn. Concession owners recoup the investment through track access charges to operators such as Eurostar and income from St Pancras station.

In the analysis by HSRG and the policy group Greengauge 21, the current line from Old Oak Common to Birmingham Curzon Street will cost £47bn, but its limitations mean the railway would have a potential concession value of only £5bn. However, building on to Euston and Crewe, while costing another £11.5bn, could make it worth £20bn.

The National Audit Office, among others, has warned that the truncated HS2 risks worsening current services north of Birmingham owing to a lack of capacity when high-speed trains join the overcrowded west coast line.

Dyan Perry, the chair of HSRG and a former chief executive of HS1, said she “appreciates that the forthcoming budget will involve ministers making tough choices. However, short-term decisions to cut investment into infrastructure would be deeply damaging to the UK, creating uncertainty and jeopardising investor confidence.

“We strongly urge Treasury officials to carefully consider our recommendations and take action to ensure the UK can fully realise the benefits of a connected rail network.”

The wider fate of Euston station is still to be decided, with uncertainty over HS2 putting full rebuilding on hold. The Department for Transport and Network Rail last week announced a short-term plan to urgently improve the overcrowded and unappealing terminus, including immediately turning off the much-criticised enormous advertising screen.