Rail franchises operators & contracts

30.01.19

Franchise payments to government slump by 40% as falling passenger numbers, strikes and delays hit rail industry’s income

Falling passenger numbers has seen the rail industry suffer a fall in income in last the year, resulting in a 40% drop in franchise payments to the government, the rail regulator has revealed.

The ORR’s annual report shows that the rail industry is being squeezed after upgrade delays, strikes and rail fare controversy has led to a fall in passenger numbers, leading to the government receiving around £400m from train operators in 2017-18 – down from £700m the previous year.

The figures show that the rail industry received £19.4bn in income last year, a 1.3% decrease from 2016-17, and income from rail fares fell 2.4%. The ORR said that the cost of running the railways also rose by 1.4% to £20.6bn.

According to the annual report, franchise payments to the government decreased due to a combination of payments made to some train operators for delays to infrastructure upgrades, and lower-than-expected growth across the rail industry.

The payments from operators were down because of planned changes set out in franchise agreements and planned cost increases on some franchises – and operators also declared £300m in dividends, which is a 27% decrease.

The income received from fares by the rail industry was £9.8bn, down 2.4% from 2016-17, which is due to a 1.4% fall in passenger journeys.

The ORR attributed some of this decrease to a massive 8% drop off in passenger journeys experienced by South West Trains, largely because of the Waterloo platform closure in summer 2017 and strike action.

Commenting on the decline in franchise payments made by train operators in 2017-18, the RMT’s general secretary Mick Cash claimed it was “another £300m added to the great rail rip-off.”

He said: “The hard truth is that another £300 million that could have been invested in guaranteeing safe staffing levels and improving services has been siphoned out of the railway in dividends by the greedy private train operators while they have slashed their returns to the public purse by the same amount.”

Network Rail’s costs rose by almost a tenth to £8.6bn, largely due to increased financing costs, and it also paid out £400m in compensation to train operators, a 4.6% increase, which “reflects poor performance.”

Image credit - alice-photo

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