Network Rail break-up threat

Richard Furlong - City Surveys Group

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Published: 28th November 2016

This Article was Written by: Richard Furlong - City Surveys Group

  


Transport Secretary Chris Grayling has announced plans to end the monopoly on repair and upgrade of British rail infrastructure.

He believes that Network Rail, the owner and infrastructure manager of most of the rail network in Britain, would benefit from increased competition in order to improve its performance.

Network Rail was created in 2002, when Labour Government promised an ‘efficient, dynamic, and commercially minded’ firm. However, Network Rail have been inundated with budget problems in recent years.

Its five year spending plan has been badly hit by construction inflation and, compounded by changes to the organisation’s funding mechanism, it has had to turn to the government for additional funding on several occasions. The Great Western electrification project budget alone has soared to an estimated £5.6bn, having been originally budgeted at just £874m.

Although Grayling acknowledges that Network Rail has suffered from under-investment, there is still a strong belief that performance needs to be dramatically improved.

Sources state that Grayling will begin the reform project in a speech before Christmas. It is expected that stretches of track and rolling stock will be put under common ownership piece by piece to break the state-owned company’s monopoly.

Southwest and Greater Anglia routes are in the spotlight to be seized from Network Rail’s control and sold under long-term concessions to investors, including sovereign wealth funds.

It is hoped that passing responsibility into the hands of rivals will force Network Rail to improve.

While privatisation can be complex and politically toxic, such changes would be welcome news for commuters. Those travelling on Southern Rail services have suffered regular delays and cancelled trains, as well as union disputes and infrastructure failures, due to Network Rail.

The debate of privatisation has been an ongoing issue. In February, a full-scale reform was ruled out by a critical review.

The report by Nicola Shaw, Chief Executive of HS1, suggested that there was room for introducing private finance into the railways at local level or for specific projects. Full privatisation was dismissed following 10,000 of its consultants opposing it,  but it was suggested that Network Rail should continue to explore alternative financing.

The report stated it had:dismissed privatisation of the whole company, and instead has focused on solutions that may be appropriate for certain parts of Network Rail as well as for specific enhancement projects.”

However, the report demonstrated the importance for Network Rail and rail operators in general to put greater emphasis on the ‘needs of the customer’ in order to survive and thrive.  

Mark Cane, Network Rail Chief, said: “I endorse Shaw’s desire to see more private finance coming into the railways. I consider that more private money and funding from the people who will benefit from railway improvements is a sensible way to deliver a bigger and better railway.”

The Rail, Maritime and Transport Union (RMT) issued a stark warning that the sale of UK rail infrastructure could further fragment the industry and lead to an even worse situation.

Of the Shaw Report, RMT’s General Secretary Mick Cash, said: “Foreign speculators will be queuing up again to plunder Britain’s railways for every last penny in the same way as they have mopped up train operations and run them into the ground. RMT will continue to fight any further attacks on Network Rail and will continue to campaign for public ownership of the entire rail system.”

The Department of Transport declined to comment on the matter and it remains to be seen just how drastic Grayling’s reforms will be for Network Rail and, indeed, the future of British rail as a whole.


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