Network Rail receives final funding determination for next five-years
It’s a complicated negotiation, but then again it is a negotiation over a multi-billion pound settlement. After a round of requests and counter-proposals, the government in London has proposed to the infrastructure management agency Network Rail for funding in the next five-year ‘Control Period’. A response has come back, to which the government’s arbiter, the Office of Rail and Road, has made its final determination. Except there’s still a final response to come back from Network Rail. Such is the labyrinth of the British railway.
The Office of Rail and Road (ORR) has unveiled its final determination for Network Rail’s Control Period Seven (CP7), covering the period from 1 April 2024, to 31 March 2029. The determination outlines the allocation of 43.1 billion pounds (just under 50.5 billion euros). The money is allocated for Britain’s railway network, strongly emphasising asset sustainability, safety, and performance. However, it may not end up in Network Rail escrow, if the planned replacement, Great British Railways is established during the period.
Network Rail’s annual appraisal interview
Since the draft determination was published in June, Network Rail has responded proactively to ORR’s challenge, by making significant revisions to its plans. Notably, Network Rail has augmented spending on core railway infrastructure by approximately £600 million, a move aimed at fortifying the network’s foundation. That comes in response to the deteriorating tolerance of the legacy infrastructure, which still forms the backbone of the UK network. Despite the ability of the Victorians to build resilient structures, they were just as adept at cutting corners.
In addition to the five-year plan, ORR’s annual periodic review process serves as a mechanism for holding Network Rail accountable and ensuring value for money for both users and funders of the railway. Now in its twenty-third year, this iteration, PR23 determination, delineates the expectations for Network Rail in terms of operation, support, maintenance, and renewal (OSMR) of the network during CP7, as well as how the available funding should be optimally utilised to support these objectives. In other words, it’s Network Rail’s annual appraisal interview – something to which absolutely nobody ever looks forward. However, since Network Rail serves the industry, it is good news for everyone who works on the railway, and in this case, especially for freight.
Much-needed stability and a solid foundation
One of the key highlights of the determination is the focus on rail freight. Confidence may be low in the industry right now (as borne out by a recent survey conducted by the Railway Industry Association). However, ORR has set ambitious targets for what Network Rail is expected to deliver for freight operators, including a reduction in freight cancellations from current levels. Additionally, for the first time, rail freight growth targets have been established across Great Britain, bringing England into line with Scotland and Wales. Track access charges for freight operators will continue to be capped below cost, further incentivising growth in the sector.
There is uncertainty over growth plans from the government. The recent cancellation of much of the HS2 high-speed rail project has put a damper on expectations. However, ORR’s five-year funding and regulatory settlement offers much-needed stability and a solid foundation for the industry to plan and invest. This stability is crucial not only for Network Rail but also for passenger and freight operators, as well as the broader supply chain.
Network Rail is now tasked with detailing how it intends to execute ORR’s final determination, a critical step in realising the vision outlined in CP7. The determination is anticipated to shape the future trajectory of the railway network, with a concerted effort towards enhancing sustainability, safety, and performance across the board. All that’s awaited is the reply. Hopefully, Network Rail will still be around to deliver it.