UK Rail Infrastructure - Change is in the Air

By Ian Horseman Sewell

Published Monday 18 January 2016

Ian Horseman Sewell, Senior Adviser to Synaps and MD of specialist rail consultancy FCP Limited, comments on the current review of Network Rail’s future.

Now that we are into 2016, High Speed 1’s Chief Executive, Nicola Shaw, is preparing to publish her much-anticipated review of the options for the future of Network Rail (NR). Publication will be timed to enable NR’s new Chairman and former TfL Commissioner, Sir Peter Hendy, to work with Whitehall on which of Shaw’s recommendations to factor into the Chancellor’s next Budget.

Network Rail (NR) has achieved a significant amount since it replaced Railtrack. The railway system has coped well with unprecedented growth in passenger numbers and freight volumes, in parallel with becoming the safest system in Europe. However, there is scope and demand for big improvements. With NR now forming part of the public sector borrowing requirement, cost-effective infrastructure provision is vital if the UK rail network is to reach its full potential.

Amongst rail executives, few doubt that we are in for a period of significant change for NR.

The need for improvements traces back to the very beginnings of NR. As Railtrack met its maker, it was thought simpler for many of Railtrack’s functions to be transferred to the new body that was to become NR. This has in fact made NR spectacularly complex and there is now a compelling case for a smaller NR organisation, focused on its core mission of delivering – more efficiently and reliably – the train paths and capacity enhancements urgently needed by operators and passengers.

So what might NR relinquish?
There are obvious candidates. There has for some time been significant interest - from consortia of asset managers and engineering/building contractors - in taking over NR’s station portfolio. Other private sector players are also keen to investigate taking over NR’s telecommunications and power distribution networks.

Further scaling down of the NR machine can come from continued devolution to regional transport authorities, where local needs and locally-driven finance-raising can be brought to bear.

To succeed, these changes will require some reconfiguration to align with political, physical and economic geographies. NR will also have to employ a much smaller number of KPIs by which individual rail routes can be compared. This more effective comparison of operational and financial performance will drive market interest and much increased efficiencies.

The ultimate impact of these kinds of divestments and devolution can be an NR organisation which acts much more effectively as UK Rail’s core “system operator”, fully focused on selling reliable train paths and setting key national engineering and safety standards.

Whilst NR’s system operator functions are likely to remain in the public sector for the time being with a national standards function, the logical consequence of the changes which NR may – and should – undergo is that investors will see opportunity in becoming custodians of entire rail routes – rather than just individual fixed asset classes or rolling stock. This may not be possible for all routes but, properly managed, such private sector participation will yield much-needed enhancements to service quality and capacity - at a more reasonable and controlled cost to the taxpayer.

The UK Utilities sector has shown exactly these kinds of improvements, with the majority of critical infrastructure now being in the private sector. Now is the opportunity for UK Rail to follow suit.