Network Rail has struggled with record expenditure in the last financial year, as its net debt increased by nearly £5bn and its delivery of works became less efficient.
The rail infrastructure operator’s annual report shows that its capital expenditure on enhancements was £3.9bn in 2016/17, up from £3.5bn the previous year. However, its renewals capital spending fell from £3.1bn to £2.8bn.
Some of the increase in spending might be traced to Network Rail being less efficient.
The annual performance report by the regulator, the Office of Rail and Road (ORR), said Network Rail only met 13 out of 19 of its completion milestones for enhancing the railway and that it is carrying out its core work ‘5% less efficiently than it did three years ago’.
The infrastructure operator had to defer renewals work from the current five year spending period into the next (2019-2024) in order to remain in budget.
The ORR said: ‘This will have implications for the future performance and sustainability of the railway and the service passengers and freight customers receive unless it is addressed in the next spending period.’
Network Rail disclosed that its net debt rose from £41.6bn to £46.3bn over the year. Writing in the annual report, chief financial officer Jeremy Westlake said further borrowing from the Government will take the company’s debt to around £53bn by March 2019.
He added: ‘In addition to the DfT loan facility we have plans to potentially sell non-core assets, and find other ways to attract commercial partners in order to deliver more capital investment.’
Under the November 2015 Hendy Plan, Network Rail planned to realise £1.8bn from the sale of non-core assets. However Transport Network has revealed that progress on this has been very slow.
Network Rail said the reliability and performance of its infrastructure assets ‘improved further this year and is now the best on record'.
‘But for a number of reasons including increasing congestion, severe weather and industrial action, train performance as a whole has not been what the industry would have liked.’ However, the ORR said a high proportion of delays on some routes were attributed to Network Rail.
Network Rail chair Sir Peter Hendy CBE said: ‘We are leading the way the whole rail industry operates in the years ahead, by both embracing new technologies and working ever more closely together to deliver the most effective and efficient outcomes for passengers.’
ORR chief executive Joanna Whittington said: ‘Network Rail’s performance over 2016-17 has been mixed. The railway continued to be safe and the reliability of some assets has increased. However, these benefits have been overshadowed by continued inefficiency and poor train performance.
‘We’re changing the way we regulate Network Rail to sharpen its focus on efficiency and performance. Network Rail must do its part and press on with its transformation programme, demonstrating that this will start to address inefficiency and meet performance expectations of passengers and freight customers now and into the spending period starting in 2019.’