Latest Rail News

25.11.15

Government intends to allow Network Rail to sell assets

The government intends to allow Network Rail to sell assets and re-invest the proceeds in rail infrastructure, subject to a value for money assessment. 

The announcement, which echoes recent calls from the Shaw report, was buried in the Spending Review and Autumn Statement 2015 document

It was stated that the government is seeking up to a further £5bn of corporate and financial asset sales by March 2020, building on successes in the last Parliament. 

Through the Spending Review up to £4.6bn of assets have been identified. And Subject to a value for money assessment, the government will: “allow Network Rail to sell assets and re-invest proceeds in rail infrastructure”. 

The Shaw report – which represents, and will lead to, the biggest shake-up of Network Rail in a decade – has floated the possibility of reclassifying the entire body as private by way of accessing the equity capital markets or selling an equity stake to investors. 

Other alternative options, inspired by transport models in other countries, include maintaining Network Rail as a public sector body while separating out a route to be given in concession to private parties, and financing specific infrastructure projects through a blend of private and public money. 

Alternative routes could include monetising non-core assets, such as charging for depots and car parks, but Shaw suggested that these property assets “have never represented a significant source of funds for Network Rail” – at least not to fund all the cost of enhancing the railway, as is done in Japan or Hong Kong. 

Join ventures and other forms of private-public sector partnerships could also be allowed to develop and build assets, and then either operate under concession for a number of years or transfer them to Network Rail. 

Speaking at RTM’s recent TransCity Rail North event, Alex Hynes, Northern Rail’s managing director, said the railways are booming – but that there is a danger that current cash levels won’t suffice. According to him, the funding shortfall could be met with hefty investments from those “desperate to buy British assets”, especially in a growing industry. 

“Foreign money, just like it flooded into the London property market, wants to flood into British assets. We’ve got to leverage in private sector money into this industry, otherwise it’ll go pop – and why do we assume it can only come from the public sector? 

“There’s loads of people who want to lend us huge amounts of money. Look at the water companies, the rolling stock companies, the energy, the gas companies,” he said. “The money’s out there. They want to invest in Britain.” 

During his speech, the chancellor, George Osborne, said: “Investing in the long term economic infrastructure of our country is a goal of this Spending Review.”

Comments

Manchester Mike   25/11/2015 at 16:13

Sounds like another Tory short term sell off of government assets to their friends in the private sector...

Huguenot   25/11/2015 at 20:44

Network Rail should not sell off land that might be required in the future (even the distant future) for widening existing railway routes, freight depots or reopenings. There are lots of examples where the formation of closed lines has been sold off and developed, preventing expansion of the network. Also, station car parks must ultimately remain under railway control as they serve to support custom for the railway: this might not be the focus for a different owner.

Lutz   29/11/2015 at 17:52

The Bowe report makes a number of welcome recommendations along highlighting areas that would benefit from further view. One of particular merit is that the report points to taking major projects away from NR's management and program office so that delivery and cost management can be come under more appropriate control.

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