The future of rail investment

Source: RTM Oct/Nov 2018

Paul Sheffield, vice president of the Institution of Civil Engineers (ICE) and ICE State of the Nation steering group chair, discusses his organisation’s report on the future of investment in the rail sector.

Rail continues to be a key part of the nation’s travel infrastructure. Passenger numbers are growing – doubling from 735 million in 1994-5 to 1.73 billion in 2016-17 – and this brings with it challenges of an increasingly congested network. 

The industry must ensure it keeps up with this significant growth – but in order to do this, there must be a strong model for future infrastructure funding and finance. It’s important that all players – industry and the government – work together on the future vision for rail.

In October, ICE published its 2018 State of the Nation report. I led the steering group over the past six months as we navigated through the topic of future infrastructure investment. The report aims to start the conversation about identifying what we need to do to ensure finance and funding is available to deliver our future infrastructure needs.

One of the areas which we recognised as needing attention is the capacity, and overall effectiveness, of the nation’s rail network.  We need sustainable and reliable travel options in the future, and this becomes even more important when we consider the changes within society, from demographics to technology.

One of the report’s key recommendations was that the government should improve the framework around market-led proposals in rail – to simplify the application process and give greater assurance to intellectual property rights.

The idea of market-led proposals – encouraging the private sector to invest in the future of rail – is one worth exploring. However, it’s also important that any framework government puts in place recognises and protects the intellectual property rights of these potential investors.

The rail industry currently relies mostly on public funding to deliver new capacity, with 82% of spending (£4.2bn) on rail investment coming from the public sector in the financial year to 2017. Without debating whether this model is the way forward, the fact is that public funds are finite. With private investment already present in franchising, it makes sense to consider possible private finance options for track maintenance and future routes as well.

The government too has recognised this, with the DfT trialling the initiative of market-led proposals earlier this year. This was part of an effort to see private instigation, design, delivery and operation of new rail capacity, which is deliverable financially without government support. It is a welcome effort to foster a culture which encourages rail as an investable asset, and as other countries have shown, it has great working potential.

For example, Australia’s plan for a new rail link to Melbourne Airport received a credible proposal put forward by the private sector, with national and state government buy-in and an equal, three-way investment split.

However, while the DfT’s model has the potential to encourage private investment, the framework must take into account the concerns from the sector about intellectual property. If private companies are to offer up innovations or ideas, they need both protection and reward. If the government must put a proposal to full competition for delivery – meaning that the owner of the idea may not deliver it – then there must be full use of confidentiality agreements and consideration of the purchasing or licensing of intellectual property.

September’s DfT announcement of a sweeping review to transform Britain’s railways will be read with interest by all in the built environment sector. The scope includes looking at how to effectively balance public and private sector involvement, and we hope that forward-thinking ideas like market-led proposals will be fully considered within this.

We all have a role to play in ensuring a sustainable future for rail, and it’s important that the funding and finance models we plan now will ensure the ability to build and maintain a strong network for many years to come.




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