UK rail looks to private sector in biggest shake-up since 1990s

Ministers have promised to open up Britain’s railways to increased competition from the private sector as part of the biggest reforms to the industry since the 1990s.

A white paper published on Thursday marks the end of the franchise system introduced a quarter of a century ago when the railways were privatised by a previous Conservative government. At the time the national system was split into more than 20 intercity and regional franchises, since reduced to 17, with the winning bidder given some flexibility on fares and services.

The reforms will still allow private companies to run services but they will instead work under a more prescriptive management contract, similar to the system in place on the London Overground.

The operator will be paid a fee to run one of regional or intercity operations to a pre-determined timetable and fare structure, and freed from the risk of having to deliver on specific financial targets set under the franchise system.

The aim is to reduce the barriers to entry for new bidders after the increasing problems with the franchising system resulted in two-thirds of new contracts since 2012 being awarded without any competition. Some operators struggled to hit revenue targets, resulting in the government having to intervene.

Most of the current franchises have ended up in the hands of a small group of companies, including London-listed FirstGroup and Go-Ahead, as well as international transport groups, which are mainly subsidiaries of other country’s state-owned rail operators.

Several listed companies, including Stagecoach and National Express, have stepped back from the UK rail system in recent years because of problems with the increasingly complex franchising system.

Grant Shapps, the transport secretary, said the changes will end a “complicated and broken system”.

Successive governments took over the running of four franchises in the past two decades as the operators failed to meet their financial obligations. When the pandemic struck, ministers put the entire network on emergency short-term contracts as passenger number fell sharply.

“It’s now time to kickstart reforms that give the railways solid and stable foundations for the future, unleashing the competitive, innovative and expert abilities of the private sector,” Shapps said.

Private companies have successfully lobbied to maintain some commercial freedom with flexibility on marketing and ticket prices on inter-city routes, where trains have to compete with airlines.

Andy Bagnall, director-general of the Rail Delivery Group, representing train operators, said private sector expertise would “be key in future”. He said the industry supported the aim of attracting new entrants “as this drives innovation and ultimately benefits passengers”.

But Mick Whelan, general secretary of Aslef, the train drivers’ union, called the reforms “deeply disappointing”, adding: “Under these plans the private companies will still pocket a profit, but all the risk — the revenue risk — is being dumped back on the public purse.”

The white paper is the final product of a three-year process to reform the country’s railways.

Ministers commissioned former British Airways boss Keith Williams to conduct a sweeping review of the railways after timetable chaos in 2018, a process delayed first by the 2019 general election and then coronavirus.

The white paper also outlines plans to introduce flexible season tickets for people commuting two to three days per week, although the discount will not be as generous on a per journey basis as an annual season ticket.

A single public body, called Great British Railways, will oversee infrastructure and operating the system including planning the network and setting fares.

Andy Burnham, mayor of Greater Manchester, welcomed most changes but told the Financial Times he was seeking reassurance that the plans would not downgrade the role of regional leaders.

Jim McMahon, Labour’s shadow transport secretary, pointed to planned cuts to infrastructure and fare rises and said ministers have offered “very little substance”.