how can we encourage more private investment in britain’s railways? tom smith chairman, atoc
TRANSCRIPT
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How can we encourage more
private investment in Britain’s railways?
Tom SmithChairman, ATOC
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ATOC's mission is to work for passenger rail operators in serving customers and supporting a prosperous railway. Set up after privatisation in 1993, ATOC brings together all train companies to preserve and enhance the benefits for passengers of Britain’s national rail network.
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The privatisation success story
• Passenger numbers increased by 69%• Historically high levels of passenger
satisfaction• Highest number of rail journeys since the
1920s• Demand forecast to double in 25 years
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From a static to a dynamic national asset
19751976
19771978
19791980
19811982
19831984
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11 r,p0
200
400
600
800
1,000
1,200
1,400 Nationalised PrivatisedPassenger journeys (millions) 1975-2011 – Source: ORR
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The McNulty challengeCosts (£bn) per passenger km – Source: Fig 3.6 McNulty full report
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The Initial Industry Plan responseCosts, revenue and subsidy requirement, England & Wales to 2019 – Source: p7 IIP
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How do we get there?
Franchise reformLonger, smarter franchises, allowing
the private sector to invest and innovate
Industry reformProgressively transform Network Rail to create contestability and
accountability with infrastructure provision
Targeted, sustained investmentNeed to keep investing in network
and train capacity as demand continues to grow
Smarter fares policyMore flexible approach to fund
investment, reduce taxpayer support and make better use of capacity
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Unlocking more private capital
Targeted, sustained investmentNeed to keep investing in network
and train capacity as demand continues to grow
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The good news
• Long term nature of assets
• Strong growth prospects
• Weathering the downturn well
• Railways have reasserted themselves as vital for the economy
• Interested capital is there
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When it works, it works wellMany good examples of private sector leadership on the railways
New stations
New services
New trains
New track
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The bad news• Investors are wary of rail
• Confidence low because franchises seen as short and unpredictable
• Government seen as ambivalent:• Wants innovation but unwilling to
step back• And seems confused about the idea
of railways generating private profit
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Total private sector investment (millions) in rail 2006-2011 (excluding Network Rail)
2006-07 2007-08 2008-09 2009-10 2010-110
100
200
300
400
500
600
700
800
900
Source: ORR
The outcome of this approach...
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Average age of rolling stock (yrs) 2000-2011
Private sector vs. government
Strategic Rail Authority(procurement by TOCs)
Department for Transport(procurement by govt)
Q2 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q12000-
012001-
02 2002-
032003-
042004-
052005-
062006-
072007-
082008-
092009-
102010-
11
0
5
10
15
20
25
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Rolling stock proposals• More responsibility to TOCs• Industry to set an overall strategy• Government to set the strategic context (HLOS/SOFA)
and use guarantees only where they might offer better value
• ROSCOs to offer more flexibility on lease terms and maintenance arrangements
• Holistic industry approach to rolling stock, embracing depot strategy, standardisation and supplier relationships
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Conclusions
• We need to reverse the trend• Rail should be a magnet for private
investment• Current industry reform agenda gives us
the opportunity• Government needs to set the tone• Investors must respond
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How can we encourage more
private investment in Britain’s railways?
Chairman, ATOC