UK seeks private partners for new Heathrow airport rail link

Private companies will be invited this summer to fund, finance and build a new £1.6bn railway between London’s Heathrow airport and the south of the capital under government plans to expand Britain’s rail network without spending taxpayer money.

The Department for Transport said it would seek a development partner for the 10km rail link, which would connect Britain’s busiest airport with lines to Waterloo station near central London as well as to Woking and Guildford. At the moment Heathrow has no direct rail connections from the south, with existing lines running to the west of the capital.

In a parliamentary statement, Chris Heaton-Harris, minister of state for transport, said the department “intends to provide further guidance to the market . . . including the process for selection of a development partner in summer 2021”.

The £1.6bn cost of the project would be paid for by the private sector, with the money recouped from access charges paid by train operators, according to Heathrow Southern Railway, a start-up vying to build the train link and which first proposed the line to the government in 2016.

Chris Stokes, chief executive of HSR, said the line would not take “a single penny of public investment”.

“The project is privately financed and user funded and the business case is strong enough for us to build the railway using private money exclusively,” he said.

The business case for the new Heathrow link does not rely on premium fares, Stokes added. “Probably uniquely for a rail project in recent years, the operating profits for the services on HSR are profitable enough to provide a full return on its capital cost,” he said.

About half of the government’s infrastructure pipeline is to be paid for by the private sector but investors have typically been wary of taking on construction risk. 

However, Stokes said that to assuage investor concerns it had sought a “usage undertaking”, under which the government would guarantee a minimum level of trains operating on the new line. The prospect of a reliable and direct link to Heathrow would almost guarantee that the service reaches its target of 33,000 passengers a day, he added.

Although passenger numbers at Heathrow plummeted from 80.9m in 2019 to 22.1m in 2020 as a result of the Covid-19 pandemic, Stokes said the airport had been “full to bursting with two runways and would fill up quickly when international air travel resumes”. 

HSR is being backed by the engineering consultancy Aecom and a group of investors, which has paid for the development of the project so far. However, other bidders could also come forward should the government press ahead with finding a development partner this summer.

The scheme would fit with the government’s commitment to reach net zero carbon emissions by 2050 by transferring 3m journeys a year from road to rail.

Alexander Jan, an infrastructure finance expert, cautioned that there were few, if any, passenger railway projects in the UK or Europe that cover operating costs and true cost of capital solely through farebox revenues.

Even the existing Heathrow Express train line, which charges some of the highest fares per mile in Europe, has struggled on this front, he added.

In a post-Brexit, Covid-19 world, lenders would be looking for “copper-bottomed guarantees from government” on minimum usage to underpin the finances of the scheme. “Without those I just can’t see how it’s bankable,” he said.

Ministers have poured billions of pounds into keeping the railways running during the pandemic, underwriting the losses suffered by train operating companies as passenger numbers have collapsed. Savings have had to be found elsewhere, including a £1bn cut to funding to upgrade railway infrastructure.

A number of other new transport schemes in the capital have been put on hold including the Bakerloo line extension to Lewisham and Crossrail 2, the north-south line across the capital.