Network Rail's debt and disruption costs eat into its cash


New data from the rail regulator has cast further light on the rail industry’s financial woes, with costs rising as income falls.

The Office of Rail and Road (ORR) has published its annual report showing how the railway was funded in the last financial year and how that money was spent.


The financial data, which has been adjusted for inflation, shows that in 2017-18 the cost of running the UK railway network rose 1.4% to £20.6bn.

Overall, Network Rail’s costs increased by 9.3% to £8.6bn, which the ORR said was largely due to increased financing costs of £2.1bn – 24% of its total spending.

Network Rail received £4.2bn in funding from governments. However, the report discloses that the Department for Transport also lent £8.4bn to Network Rail as debt funding, up from £6.1bn in 2016-17.

Network Rail’s total debt at March 2018 was £50.4bn.

Following the news that Network Rail’s payments to train operators for planned and unplanned disruption rose by £52m in 2017/18, the ORR said that such payments, under Schedule 4 and Schedule 8 respectively, totalled £439m in the year - an increase of 4.6%, after adjusting for inflation.

Overall the industry received 1.3% less income than in 2016-17 (£19.4bn). The ORR said this is largely because falling passenger numbers meant that income from fares fell 2.4% compared to the previous year. As Transport Network reported earlier this week, ticket revenue increased by 2.3% before adjustment for inflation.

The ORR also attributed the fall in revenue to 1.4% fall in passenger journeys. It said this fall was largely because of the 8% decrease in journeys experienced by South West Trains, largely due to the Waterloo platform closure in summer 2017, and strike action.

The fall in revenue,contributed to lower returns to governments from train operators, resulting in an 8% increase in funding from government, includng devolved governments. However, governments still received £0.4bn net from train operators, a reduction of £0.3bn from the previous year.

Franchised train operators’ overall costs fell 1.6% to £12.9bn. The ORR said this is largely because they paid 12.1% less to government. However, operators saw their costs increase for staff (0.9%), rolling stock (5.5%) and other operating costs such as access charges (1.4%).

Train operators’ declared dividends totalled £0.2bn, a decrease of 27% from 2016-17, but still up 6.5% compared to five years ago. The ORR said that over the last five years, dividends have remained equivalent to around 2.5% of passenger fares. 

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