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18.11.15

Privatising one NR route could raise money if £38.5bn ‘not enough’ for CP5

Network Rail will not be able to get by with its £38.5bn budget for this control period unless it leverages in private sector money, the head of Northern Rail has suggested, as other rail leaders consider the “interesting opportunities” presented by further privatisation and the implications of last week’s Shaw report.

Speaking at RTM’s recent TransCity Rail North event, Alex Hynes, Northern’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.”

His suggestion mirrored what other rail bosses were saying throughout the event, with some referring to Nicola Shaw’s interim report released last week.

Philip Hoare, Group MD at Atkins Transportation, said: “We’ve heard the [Shaw report], that talks about the potential for privatisation in a part of the network or even more than that. I think that presents some interesting opportunities.”

Shaw’s interim report into the scope of the future shape and financing of Network Rail specifically said: “[O]ne scenario could be 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 combination of private and public money.”

The Atkins transport chief said there is definitely a momentum building around creating a more long-term view of major infrastructure in the country – but that the upcoming CP5 review by Sir Peter Hendy, due imminently, could throw plans out the window without outside investment.

“There’s no doubt that things like the Hendy review cause a pause – I guess pause is the word that’s in vogue at the moment…If the indications are there that Network Rail will fund the programme through perhaps selling some of its existing assets, then that will be fantastic,” he concluded.

All rail leaders present at the event, including HS2 boss Simon Kirby and head of the National Infrastructure Commission Lord Adonis, agreed that a potential source of private cash injection could be foreign direct investment.

In fact, they predicted that there was going to be a flood from investors, citing China as a major example – given the chancellor’s recent visit to the country, during which he launched the HS2 phase 1 contract tenders.

Adonis said wider sources of funding would be particularly necessary in larger projects, such as Crossrail 2 and HS3 – but Kirby said that it wasn’t too late for HS2 to do the same.

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