How can we
encourage more
private investment
in Britain’s
railways?
Tom Smith
Chairman, ATOC
ATOC's mission is to work for
passenger rail operators in
serving customers and
supporting a prosperous
railway. Set up after
privatisation in 1993, ATOC
brings together all train
companies to preserve and
enhance the benefits for
passengers of Britain’s national
rail network.
The privatisation success story
• Passenger numbers increased by 69%
• Historically high levels of passenger
satisfaction
• Highest number of rail journeys since the
1920s
• Demand forecast to double in 25 years
0
2010-11…
2009-10
2008-09
2007-08
2006-07
2005-06
2004-05
2003-04
2002-03
2001-02
2000-01
1999-00
Nationalised
1998-99
1997-98
1996-97
1995-96
1994-95
1993-94
1992-93
1991-92
1990-91
1989-90
1988-89
1987-88
1986-87
1985-86
1984
1983
1982
1981
1,400
1980
1979
1978
1977
1976
1975
From a static to a dynamic national asset
Passenger journeys (millions) 1975-2011 – Source: ORR
Privatised
1,200
1,000
800
600
400
200
The McNulty challenge
Costs (£bn) per passenger km – Source: Fig 3.6 McNulty full report
The Initial Industry Plan response
Costs, revenue and subsidy requirement, England & Wales to 2019
– Source: p7 IIP
How do we get there?
Franchise reform
Longer, smarter franchises, allowing
the private sector to invest and
innovate
Industry reform
Progressively transform Network
Rail to create contestability and
accountability with infrastructure
provision
Targeted, sustained investment
Need to keep investing in network
and train capacity as demand
continues to grow
Smarter fares policy
More flexible approach to fund
investment, reduce taxpayer
support and make better use of
capacity
Unlocking more private capital
Targeted, sustained investment
Need to keep investing in network
and train capacity as demand
continues to grow
The good news
• Long term nature of assets
• Strong growth prospects
• Weathering the downturn well
• Railways have reasserted
themselves as vital for the
economy
• Interested capital is there
When it works, it works well
Many good examples of private sector leadership on the railways
New stations
New trains
New services
New track
The bad news
• Investors are wary of rail
• Confidence low because
franchises seen as short and
unpredictable
• Government seen as ambivalent:
• Wants innovation but unwilling to
step back
• And seems confused about the idea
of railways generating private profit
The outcome of this approach...
900
Total private sector investment (millions) in rail 2006-2011 (excluding Network Rail)
800
700
600
500
400
300
200
100
0
2006-07
2007-08
2008-09
2009-10
2010-11
Source: ORR
Private sector vs. government
Average age of rolling stock (yrs) 2000-2011
25
20
15
10
Strategic Rail Authority
(procurement by TOCs)
5
Department for Transport
(procurement by govt)
0
Q2
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 201001
02
03
04
05
06
07
08
09
10
11
Rolling stock proposals
• More responsibility to TOCs
• Industry to set an overall strategy
• Government to set the strategic context (HLOS/SOFA)
and use guarantees only where they might offer
better value
• ROSCOs to offer more flexibility on lease terms and
maintenance arrangements
• Holistic industry approach to rolling stock, embracing
depot strategy, standardisation and supplier
relationships
Conclusions
• We need to reverse the trend
• Rail should be a magnet for private
investment
• Current industry reform agenda gives us
the opportunity
• Government needs to set the tone
• Investors must respond
How can we
encourage more
private investment
in Britain’s
railways?
Tom Smith
tom.smith@atoc.org
Chairman, ATOC