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Rail Economy


Since the privatisation of British Rail in 1992 the East Cost Mainline franchise has changed hands 5 times. Each new company bringing different corporate brands with there own snappy slogans, snazzy uniforms. But theres one thing that hasn’t changed much, the trains and the quality of service. It was hoped that private companies would bid for franchises bringing fresh ideas, dynamic management and modern innovations. With the UK Government hoping for “More Competition, Greater Efficiency an a Wider Range of Services.” Last month the Government rules to allow the operators of the East Cost Mainline Virgin Rail and Stagecoach to exit there contract early to avoid operating at a loss of an estimated £2bn, however with only a handful of potential bidders to take over the contract a new bailout deal may be struck to allow Virgin Rail and Stagecoach to continue to operate but at preferential terms. However this possible bailout has been called a “Scandal” that “threatens to undermine the the legitimacy of the whole franchising system.”


With passenger numbers more than doubling since the end of British Rail with 1.7bn passengers using the UK rail network in 2016-17 compared to 735m in 1994-95. Much of this down to the modern lifestyles with people choosing to live in more rural and sub-urban areas and an increased population rather than due to the benefits of privatisation. However privatisation has led to more rail services with the UK having the most utilised trains and tracks in developed Europe other than the Netherlands, which has also likely led to increase in passenger numbers. 


Investments in the network is currently around 4 times its pre-privatisation days of £1.6bn in the 1980s. Last year £925m of investment came from the private sector to meet the demand for new rolling stock, and the Government investing £4.2 in 2016-17 twice the amount invested back in 1996 of £2.3bn. However the privatisation has allowed companies to use alternate investment methods that were not utilised by HM Treasury for British Rail. However after 2 decades of privatisation with corporate responsibility and investments in the rail network it is difficult to notice any sign that the network has become financially sustainable or secure. 


 The most debated post-privatisation subject has been the way that that Government dealt with the privatisation process. Instead of the private sector taking British Rail and turning it into a single regulated monopoly like water and gas. Instead the Government split British Rail into 3 sectors, Track, Rolling Stock and, Train Operators. These 3 sectors when then sold to 100 different companies over a 2 year span from 1995 to 1997. With multiple different companies providing the rail services from signalling to maintenance and buying tickets to train operations has created a fragmented society with everyone working to their own agenda and not always seeing eye to eye. Causing the cost of running the network to be about 40% more than European networks. 


The train you get on is owned by a bank, leased to a private company, which has a franchise from the Department for Transport to run it on a network owned by National Rail, all regulated by another office, with this bill being shared for by passengers and tax payers. Almost all of the current rolling stock is leased to service operators for around £1.5bn annually, with the big 3 providers being Angel Trains, Porterbrook and Eversholt which are in the hands of financial investors, overseas ownership structure which makes tracing the money almost impossible. However recently the Government have attempted to procure trains direct from the manufacturer to get around the additional cost of leasing, but this have been criticised as a waste of public money.


Despite the Government doubling the amount of funding from £2.3bn in 1996 to £4.2 in 2016-17, in recent years a decision was made to increase the cost of ticket prices to consumers. Accruing to a total increase of 25% from 1996 and fares currently 30% more expensive than France, Switzerland and most other Western European countries. The rise of 3.4% introduced on 1st January was met with anger forcing many commuters to spend over £5000 for an annual rail cards for example a journey between Brighton and London a journey time of just an hour.


With the current reputation of the train network. Labour have proposed to bring the franchises back under state control as they expire and commissioning trains straight from the manufacturer to leviate leasing fees. In October Conservative think-tank Legatum found that 75% of the UK population agreeing with Labours proposal. Labours critics suggest that this may fix the franchising issues but will not fix the issues of National Rai. However with many franchises renewed from 1st January until the early-mid 20’s there is not going to be a resolution anytime soon.