Video: New Leeds and Sheffield rail lines - full details

Extending the already-planned London to Birmingham HS2 line as far as Manchester and Leeds is designed to cut journey times, ease overcrowding and boost regional business.

Officials say the £32.7 billion project will create at least 100,000 jobs.

The announcement came as Mr Cameron and Cabinet colleagues arrived in Leeds for a regional meeting.

But the Government is braced for a fresh backlash from rural communities through which the line will pass and some controversy over the chosen location of stations.

The Department for Transport said there would be five stops on the 211-mile Y-shaped extension northwards from Birmingham - scheduled to be completed in 2032, six years after the first phase:

• Manchester - alongside the existing Piccadilly station;

• Manchester Airport - interchange by the M56 between Warburton Green and Davenport Green;

• East Midlands - at Toton, between Nottingham and Derby and one mile from the M1;

• Sheffield - at Meadowhall shopping centre;

• Leeds - at New Lane in the South bank area connected to the main station by walkway.

There will also be a “dedicated link” alongside the high-speed line at Crewe to link up with standard trains - reducing journey times to Liverpool and Glasgow.

But a proposed spur to Heathrow has been put on hold pending the results of Sir Howard Davies’ review of future airport capacity - which is not due to give a final report until the summer of 2015.

The Department for Transport said the journey from Manchester to Birmingham would be reduced to 41 minutes and from Manchester to London to 1 hour 8 minutes - almost half the present times.

Leeds will be 57mins away from Birmingham compared to 1hr 58 mins today, and 1hr 22mins away from London Euston, down from 2hrs 12mins - official projections say.

Deputy Prime Minister Nick Clegg defended the decision to site the new Sheffield HS2 station three miles from the city centre as he predicted the project would help heal the UK’s north-south economic divide.

Mr Clegg, who is MP for Sheffield Hallam, was speaking at the site of the proposed new station at the giant Meadowhall Shopping Centre, next to the M1.

He said the HS2 project was “good for the whole country and especially good in healing this north-south divide that we have in our economy for far, far too long.”

Asked about criticism that the line will not run into Sheffield city centre, Mr Clegg said “The city centre option is not a cost-free one.

“It would be a lot more expensive and also the train link would be slower, which slightly defeats the purpose of the whole exercise.”

The Deputy Prime Minister said a route in central Sheffield would have cut through a 4,000 home community housing development, the state-of-the-art Advanced Manufacturing Park in Rotherham and a stretch of ancient woodland.

He said: “If you look at those balance of effects of one location versus another, most fair-minded people would conclude, as the Department for Transport has, that this is a better location.”

Mr Clegg said: “Having the high-speed rail link just coming here for instance, in South Yorkshire, will lead to the creation of thousands of jobs.

“It’ll mean that businesses here are much more connected with the rest of the country - only an hour from here down to London.

“That’s close to halving the travel time from South Yorkshire to London and that’ll create investment.”

He went on: “I hope people will look objectively at the case that is being made by the Department for Transport for the Meadowhall option.

“Of course, what you need to do at the same time is investing in this location for the new high-speed station to make sure that the links to Meadowhall from the rest of Sheffield are improved as well.”

Tim Hale, chair of the Sheffield Chamber of Commerce’s Transport Forum, said: “At last the announcement over the high-speed rail station has been made.

“While some may wish to have seen it closer to Sheffield city centre, on balance the connectivity of Meadowhall to the whole of the city region is probably better.

“Now the Government must address the resulting issues.

“It is important that those who are negatively affected by the announcement have their fears dispelled quickly.

“The authorities need to resolve such problems quickly and efficiently so that businesses are not affected, and lives not blighted, by worry over what will happen, when it will happen and how quickly compensation will arrive.

“Getting this right will go a long way to ensuring that HS2 will be good for the regional economy.”

Richard Wright, executive director of Sheffield Chamber of Commence, said: “This is good news for the Sheffield city region, but it is only the start of a lot of work ahead to bring an effective high-speed rail system to the area.

“Plans must be created now to ensure the station is properly connected to all areas of the city region. This includes improving parking and the existing transport networks around the Meadowhall area.”

Mr Wright said some questions remained, including over improvements to the nearby M1 and linking the Meadowhall site to other transport infrastructure.

The Department of Transport said the Meadowhall station will be connected to Sheffield Midland station, in the city centre, by a link with a five-minute journey time and nine trains per hour in peak times.

A spokesman said this would mean a time saving of more than 40 minutes on the journey from Sheffield Midland to London and 23 minutes to Birmingham.

He said HS2 is also expected to support the creation of around 5,000 jobs in the station development regeneration areas around Meadowhall and he explained how the station’s location would connect well with Rotherham, Barnsley and beyond to Wakefield, Doncaster, Scunthorpe, Leeds and Manchester.

Labour backs HS2 - which was begun under its administration - but says there are “worrying signs” that the timetable for delivering it is slipping.

Transport Secretary Patrick McLoughlin said that he intended to bring forward the consultation on phase two to begin this year, not 2014, and has asked officials to see whether the entire project can be speeded up.

The route is due to be finalised by the end of next year.

“As with previous consultations, we will work closely with communities and interested parties to find the right balance between delivering the essential infrastructure that we need and respecting the rights and justifiable concerns of those who will be most affected by HS2’s construction,” he said.

The proposed routes were “a great starting point for the process of engagement to follow”, he said, saying it would “deliver a priceless dividend” for the UK.

“While doing nothing would be the easy choice it would also be the irresponsible choice. This is an unparalleled opportunity to secure a step-change in Britain’s competitiveness and this Government will do everything possible to ensure that the towns and cities in the Midlands and the North get the connections they need and deserve to thrive,” he said.

Officials said there would be “a generous compensation package for people living near the line” as well as noise and other nuisance mitigation measures such as tunnels.

Mr Cameron said: “Linking communities and businesses across the country and shrinking the distances between our greatest cities, High Speed Rail is an engine for growth that will help to drive regional regeneration and invigorate our regional economies.

“It is vital that we get on board the high-speed revolution.

“We are in a global race and this Government’s decision to make High Speed Rail a reality is another example of the action we taking to equip Britain to compete and thrive in that race.

“High Speed Rail is a catalyst that will help to secure economic prosperity across Britain, rebalance our economy and support tens of thousands of jobs.”

Mr McLoughlin acknowledged that there would be opposition to the plan but insisted it was essential to build rail capacity.

“One knows that you are going to upset a number of people because the route will go through their area and that will be annoying for them and you will get opposition to it,” he told the BBC Radio 4 Today programme.

“But I think, overall, one has got to look at the long-term chances for the United Kingdom. This is the first railway to be built north of London for 120 years.

“The easy thing for the Government would be not to do this.

“It isn’t just about journey time - it is actually about capacity, it’s about making sure that all those services people are calling for we are able to develop services later on for.”

Chancellor George Osborne said HS2 would be an “engine for growth” in the North and Midlands, creating tens of thousands of jobs across the country.

He acknowledged widespread opposition to the line from communities along its route which face “very difficult” disruption to their lives, but said the economic benefits were “pretty compelling”.