• Our booking engine at tickets.railforums.co.uk (powered by TrainSplit) helps support the running of the forum with every ticket purchase! Find out more and ask any questions/give us feedback in this thread!

Could GB railways return to profit?

Status
Not open for further replies.

JamesT

Established Member
Joined
25 Feb 2015
Messages
2,641
Although a lot of public bodies are finding out years down the line, it’s costing more. A couple of adjacent councils to my local council area are ‘insourcing’ the services they privatised, purely for cost and flexibility reasons.

Isn’t it true (pre-covid) the ECML franchise, post privatisation, has performed the best financially whilst it’s been under public ownership (East Coast and LNER)? I wonder if there’s any other examples of this...
Railways should be government owned in my opinion, I mean look at how many other countries are then their companies run TOC’s in the Uk.

Yes I believe the railways could return to profit, if nationalisation returned and more freight was moved from being carried by road to rail.

No, VTEC were paying 20% more in premium payments to the government than DOR did*. The problem has been that companies have got too over ambitious and promised too much in premiums and although profitable haven’t been able to quite make enough profit to fulfil those promises.

Are heavy, slow freight services really a more profitable use of the capacity on our railways such that it would be worth shifting the balance? Given the intensive use of many parts of the network, you’d only get more freight on by cutting passenger services which won’t be popular.

* https://publications.parliament.uk/pa/cm201719/cmselect/cmtrans/891/89105.htm
 
Sponsor Post - registered members do not see these adverts; click here to register, or click here to log in
R

RailUK Forums

LNW-GW Joint

Veteran Member
Joined
22 Feb 2011
Messages
19,555
Location
Mold, Clwyd
I mean look at how many other countries are then their companies run TOC’s in the Uk.
All the EU railways are opening up to competition in much the same way as here - SNCF has just set up in Spain for instance.
Regional networks are going out to tender already.
UK operators can bid, but most don't seem to have the appetite after their UK experience.
Go Ahead and National Express operate some regional services on the continent.
Arriva has quite a sizeable operation in multiple countries which is run from Sunderland, even if it is part of DB.
 

tbtc

Veteran Member
Joined
16 Dec 2008
Messages
17,882
Location
Reston City Centre
The Inter-City sector of BR made an operating surplus in, I think, 1994, just before privatisation.

I think that it's more "the profitable bits of BR were allocated to InterCity" (rather than "the InterCity bits of BR were profitable") - which is why InterCity was this strange mix of routes with some massive gaps (Liverpool - Manchester - Leeds - York - Durham - Newcastle linked half a dozen cities but didn't quality as being "InterCity", yet London Victoria - Gatwick Airport *was* InterCity!) - so the InterCity maps that you got at stations and in diaries etc showed this really strange map of the country with massive gaps

Although a lot of public bodies are finding out years down the line, it’s costing more. A couple of adjacent councils to my local council area are ‘insourcing’ the services they privatised, purely for cost and flexibility reasons

Welcome to The Forum.

You're right that these things sometimes come back "in house" - especially if councils etc have their fingers burned by a bad outsourcing contract - I'm not saying one is better than the other - just that there are a lot of 'unprofitable" services out there that can be privatised - no reason why rail services have to be run directly by the state

Isn’t it true (pre-covid) the ECML franchise, post privatisation, has performed the best financially whilst it’s been under public ownership (East Coast and LNER)? I wonder if there’s any other examples of this...

I'm not sure that's true - the private contracts promised a certain amount of premium to the state - whereas East Coast/ LNER were free of any responsibility (they just handed over any surplus that they had made, with no penalties)

If unprofitable services such as Northern didn't provide feeder services then then it's unlikely either the East or West Coast mainlines would be profitable either.

I don't think anyone's calling for all of Northern to be scrapped, just that there are certain very lightly loaded lines in the Northern network that produce very few passengers, so their contribution to the ECML/WCML is going to be pretty negligible
 

al78

Established Member
Joined
7 Jan 2013
Messages
2,400

Running the railway cost more than £20bn in 2019. Passenger revenue covered a little more than half that, other non-governmental income covered a further £2bn.

In order to achieve profitability with 0 subsidy the industry would either have to half costs, double fares or find the balance in between.
Or rip up all or most the loss making lines.

I'm pretty sure they did, in the "Golden Era" and before then (ie: before 1930).
Before mass car ownership took off and pre-motorways.
 

deltic

Established Member
Joined
8 Feb 2010
Messages
3,201
Avaricious local authorities have killed the high street which deterred the big retailers from investing and customers from going there.
Sorry completely off-topic but I couldn't let this comment go unchallenged. Rates are set by central government, most property is privately owned so rents are set by the private sector and where councils charge for parking it is often priced well below market rates - ie the land could receive a higher return if used for something else. So not sure how local authorities have been avaricious or responsible for killing the high street. Those of us who buy on line and drive to out of town shopping centres have killed the high street not councils.
 

A0wen

On Moderation
Joined
19 Jan 2008
Messages
7,451
Sorry completely off-topic but I couldn't let this comment go unchallenged. Rates are set by central government, most property is privately owned so rents are set by the private sector and where councils charge for parking it is often priced well below market rates - ie the land could receive a higher return if used for something else. So not sure how local authorities have been avaricious or responsible for killing the high street. Those of us who buy on line and drive to out of town shopping centres have killed the high street not councils.

BIB - but *why* have we deserted the town centres?

A - because of rip off parking charges for the pleasure of parking in a multi storey car park which reeks of urine.

Because the selection of shops and in shops is poor - and whilst rates may be set centrally, many local authorities have blocked or impeded development plans which have meant retailers have the choice of trying to continue to trade out of sub-standard units which are no longer fit for purpose or decamp to purpose built out of town units, they've chosen the latter.
 

Bald Rick

Veteran Member
Joined
28 Sep 2010
Messages
29,070
The Inter-City sector of BR made an operating surplus in, I think, 1994, just before privatisation.

Intercity was in profit from the late 80s. NSE almost made it into profit before privatisation, but the early 90s recession scuppered it. For NSE this was achieved by a decade of fares rises well above inflation.


Isn’t it true (pre-covid) the ECML franchise, post privatisation, has performed the best financially whilst it’s been under public ownership (East Coast and LNER)?

No, it’s not. Financially it performed better in private hands.

If unprofitable services such as Northern didn't provide feeder services then then it's unlikely either the East or West Coast mainlines would be profitable either.

A common misconception. If you look at where those franchises make their money, very little of it is fed from local routes.
 

davetheguard

Established Member
Joined
10 Apr 2013
Messages
1,807
The mainland U.K. railway could make a profit if we close about 90% of lines to passengers and make a very large number of staff redundant.

Ah, the search for a profitable core! That's been tried before, but like flat earthists it never quite goes away.
 

Bald Rick

Veteran Member
Joined
28 Sep 2010
Messages
29,070
Ah, the search for a profitable core! That's been tried before, but like flat earthists it never quite goes away.

Excluding the effects of Covid, there is unquestionably a ‘profitable core’ of the railway. Two major issues with it though:

1) it changes over time
2) It is not the most profitable solution for the country.
 

Ken H

On Moderation
Joined
11 Nov 2018
Messages
6,272
Location
N Yorks
...


I don't think anyone's calling for all of Northern to be scrapped, just that there are certain very lightly loaded lines in the Northern network that produce very few passengers, so their contribution to the ECML/WCML is going to be pretty negligible
care to name lines?
 

Annetts key

Established Member
Joined
13 Feb 2021
Messages
2,644
Location
West is best
Ah, the search for a profitable core! That's been tried before, but like flat earthists it never quite goes away.
I was not realistically suggesting that as a country we should try searching for a profitable core. But just with any loss making business, I’m sure some ‘bright spark’ could be found to do a hatchet job and then tell the government that they have sorted out a down sized business that can make a profit. Is this not what happens when a new owner buys a failing chain of shops and then proceeds to close a very large number of them with a comment like ‘we are focusing on our core business’?

As indicated earlier, closing any significant number of services is currently not politically acceptable. The real question is not could the railways make a profit, but what level of financial support should there be from government? And can the railways be more efficient?

Certainly, the answer to the last part is yes. There is wasted money just in the infrastructure side alone. Partly due to the way that renewal and improvement projects are put together the way they are.

For example, it’s occasionally (just a bit) mentioned about the cost of electrification programmes. One of the costs is renewal or alteration of the signalling system so that it is compatible with the electrification system. With the electrification programme on the Western, unfortunately money was wasted due to various items of signalling equipment being renewed, only for it some of these having to be renewed again after the OHL had been designed and installed because of insufficient clearances. Or because track work had taken place to realign junctions. Or because the track needed to be lowered in tunnels and there were existing cable routes under the track. It’s not exactly cost effective to only get a couple of years service from an item of equipment that normally should last ten years or more.

And where one project overlaps with another project, and one is running behind schedule, this can also increase costs and hence reduce efficiency. The four tracking of the Filton bank between Bristol T.M. and Filton Abbey Wood is an example. The signalling system on the line was supposed to have been renewed well before the track work. But it was not. In order to clear the area where embankment work and track work was taking place, a lot of the existing signalling equipment had to be removed, and new conventional signalling equipment installed on the other side of the line. This new signalling equipment was only in use for a short time (just less than a year I think) before it became redundant when the intended new signalling system (of a different design) replaced it.

In the past, there have apparently been comparisons between the cost of construction of a new railway line and of a new road with equivalent capacity. And apparently the cost of a new railway line is said to be cheaper per mile (I don’t think this included electrification).

But obviously the running and maintenance costs of a railway line are greater than the equivalent road.

And how the public views the road network is distorted due to the way that the road network is funded.
For example, does anyone know how much, as a proportion, of a bus fare goes towards the maintenance and running costs of the roads that that bus service runs on?
 

O L Leigh

Established Member
Joined
20 Jan 2006
Messages
5,612
Location
In the cab with the paper
Excluding the effects of Covid, there is unquestionably a ‘profitable core’ of the railway. Two major issues with it though:

1) it changes over time
2) It is not the most profitable solution for the country.

Another issue with the profitable core is that it is supported by the unprofitable, er, outer parts. Trim those away and suddenly the core stops being profitable.
 

Bald Rick

Veteran Member
Joined
28 Sep 2010
Messages
29,070
Another issue with the profitable core is that it is supported by the unprofitable, er, outer parts. Trim those away and suddenly the core stops being profitable.

As I said upthread, a common misconception. Clearly there are some parts of the network that are supported by others. But, for example, the ECML from London to Edinburgh / Leeds / Cambridge would be profitable stand alone, as would the Thameslink route Bedford to Brighton.
 

Ken H

On Moderation
Joined
11 Nov 2018
Messages
6,272
Location
N Yorks
Another issue with the profitable core is that it is supported by the unprofitable, er, outer parts. Trim those away and suddenly the core stops being profitable.
Then you get into arguments about attributing costs. if you take the Leeds - Ilkley line. How much of the costs of Leeds station infrastructure does the Ilkley line get attributed to it? Would those costs go away if you closed the Ilkley line?
Or do we go back to the sectorisation days where Inter City paid all the costs for a line on which it ran, and everyone else got a free go? Dissecting a business with synergy is quite difficult.
 

Annetts key

Established Member
Joined
13 Feb 2021
Messages
2,644
Location
West is best
Another issue with the profitable core is that it is supported by the unprofitable, er, outer parts. Trim those away and suddenly the core stops being profitable.
There are lots of problems with trying to work out what is, and what is not, or what may be, or may not be profitable.

Not least because of how ticketing works and how track access charges work.

For example, holders of a annual twelve month season ticket can normally travel by any train for the route that the ticket is valid for. But the TOC will have no idea on which actual trains the passenger actually gets. Yes, the vast majority of passengers will be commuters doing the ‘9-5’ trip. But with flexible working and now remote working, this makes past assumptions (which may or may not have been valid) even less useful.

And a significant amount of leisure travel results from various events being held. How does the railway predict how much effect these have on any operating costs / profit? Especially as not all events take place at the same location or at the same date each year...

Then you get into arguments about attributing costs. if you take the Leeds - Ilkley line. How much of the costs of Leeds station infrastructure does the Ilkley line get attributed to it? Would those costs go away if you closed the Ilkley line?
Or do we go back to the sectorisation days where Inter City paid all the costs for a line on which it ran, and everyone else got a free go? Dissecting a business with synergy is quite difficult.
Exactly.
 

paul1609

Established Member
Joined
28 Jan 2006
Messages
7,189
Location
Wittersham Kent
Intercity was in profit from the late 80s. NSE almost made it into profit before privatisation, but the early 90s recession scuppered it. For NSE this was achieved by a decade of fares rises well above inflation.
Only because of the way the routes were allocated. If Gatwick Express had been NSE it would have been NSE that would have been profitable largely because of the Orcats raid on the Brighton line/ south coast season ticket basket. Thats before huge loss making secondary inter city routes to places like Exeter, Worcester, Hereford and Kings Lynn were bizarely (geographically) speaking included in NSE.
 

LNW-GW Joint

Veteran Member
Joined
22 Feb 2011
Messages
19,555
Location
Mold, Clwyd
Another issue with the profitable core is that it is supported by the unprofitable, er, outer parts. Trim those away and suddenly the core stops being profitable.
But the decision about the national balance between profit and loss making lines lies with the DfT/SG/WG when it lets new contracts, not an individual TOC or set of lines.
The aim with each of the TOC contracts is to deliver the services for the most profit/least "support" over a period.
There's every sign that the government (Treasury/DfT) doesn't think it is getting value for money with the current setup and will change it.
Every TOC that slips into OLR operation is a failure of the system, and will require more subsidy/cost cuts to survive.
 

tbtc

Veteran Member
Joined
16 Dec 2008
Messages
17,882
Location
Reston City Centre
care to name lines?

Plenty - generally anywhere on the "Provincial" network with less than an hourly service ought to be at least looked at (plus a number of places that do have an hourly service - e.g. Darnall is local to me but it's never going to get decent numbers - it's an hourly service to a station on the edge of the city centre, whereas the nearby bus stop has a service every five minutes into the heart of Sheffield)

I've had discussions on here recently about the lightly used stations between the S&C junction and Carnforth (the three stations west of Giggleswick have a combined fifty departing passengers a day, spread across several departures in each direction) and the Colne branch (an average passenger load that would fit in a minibus)

But every time you suggest trimming any lightly used bit of the network, the usual excuses come out - we're meant to think that cutting a lightly used station will mean closing the entire ECML within a few weeks, such is the domino effect (plus some hysteria about Beeching/ Serpell)

Realistically, BR used to trim back lightly used stations/lines, and the world carried on without noticing - e.g. did passenger numbers from Derby to London drop after the Sinfin branch closed? Did the Sinfin branch closure lead to the entire MML being shut? Or did it only inconvenience a handful of people and the vast majority of passengers carried on regardless?

See also Weymouth Quay, Balloch Pier, Ongar, Errol... they closed, very few people even noticed, it didn't lead to any main lines closing or have any major impact upon how "profitable" the InterCity services were. At the moment we have this strange mentality akin to people worrying that a haircut or trimming of fingernails will lead to the entire body regressing which leads to organ failure. You could cut services like Goole - Knottingley or Stalybridge - Stockport and not even notice the effect on passenger numbers at Leeds or Stockport.

I'm not saying we leave places without public transport entirely, but some villages are more suited to a minibus (or even a dial-a-ride "responsive" service) than the blunt/expensive heavy rail option. Heavy rail is great at certain kinds of flows - I'd rather that we focussed investment on those kind of routes - you can grow the railway whilst also trimming back some lightly used parts - look how the railway grew despite the closure of stations like Sinfin - why do people think that cutting a station like Denton would lead to the whole network retrenching?
 

24Grange

Member
Joined
7 Jan 2021
Messages
237
Location
Baldock
We could probably survive in this country without a rail network at all ( some places around the world do ) - but we couldn't survive if we didn't have a road network.
 

Annetts key

Established Member
Joined
13 Feb 2021
Messages
2,644
Location
West is best
We could probably survive in this country without a rail network at all ( some places around the world do ) - but we couldn't survive if we didn't have a road network.
I vote we close all the major roads and motorways. That would enable the railways to become closer to being profitable :p
 

Merle Haggard

Established Member
Joined
20 Oct 2019
Messages
1,979
Location
Northampton
In the fall-out from the early termination of the VTEC franchise a report I saw somewhere gave the impression that the access charges had been split approximately 50:50 between DfT and VTEC during the years of franchise operation. I may have got this wrong, but if true it would mean that, if VTEC had instead been responsible for all track access charges for its train services, the profitability would obviously be reduced and might even become a loss. Of course, in a comparison between private VTEC and public LNER, the present operator might have the same arrangement. I'm sure someone will correct me if I'm wrong...

It does seem to me odd that information about such detail (effectively, a subsidy) is not readily in the public domain when the public (or, at least, those that pay tax) are being held financially responsible.
 

Bald Rick

Veteran Member
Joined
28 Sep 2010
Messages
29,070
It does seem to me odd that information about such detail (effectively, a subsidy) is not readily in the public domain when the public (or, at least, those that pay tax) are being held financially responsible.

It is in the public domain. Look up the ORR railway finance publications.
 

zwk500

Veteran Member
Joined
20 Jan 2020
Messages
13,228
Location
Bristol
It does seem to me odd that information about such detail (effectively, a subsidy) is not readily in the public domain when the public (or, at least, those that pay tax) are being held financially responsible.
Specifically, look at Table 7223 on the page I linked to in post #3
 

A0wen

On Moderation
Joined
19 Jan 2008
Messages
7,451
I think it's "bit in bold"
Correct - its useful for highlighting and responding to part of a post withput deleting parts of the post which might otherwise change its context or meaning.
 

O L Leigh

Established Member
Joined
20 Jan 2006
Messages
5,612
Location
In the cab with the paper
As I said upthread, a common misconception. Clearly there are some parts of the network that are supported by others. But, for example, the ECML from London to Edinburgh / Leeds / Cambridge would be profitable stand alone, as would the Thameslink route Bedford to Brighton.

Yes you did, in a rather matter-of-fact "take it or leave it" tone without any further explanation.

Given that the hunt for the profitable core seems to carry some sort of mythical status suggests that proving it's existence might be hard to do. Quite apart from the problems proving the issue by picking apart the revenue and costs already outlined above, it's not clear whether you mean that the East Coast route in it's entirety is profitable, including the infrastructure and all other operating costs, or if you're simply making the case that the relevant TOCs (presumably LNER and GTR GN/TL) are showing operating profits. It is perhaps worth noting also that, although LNER is paying an operating premium, it is getting a slightly easier ride as an operator of last resort than either of the previous two franchised operators did. It would be interesting to speculate (or maybe it is even provable) just how VTEC might have compared during the last operating period compared to LNER.

Even if we allow the assumption based on TOC operating profits, these services do not operate in a vacuum. People arriving at East Coast route interchanges will have travelled from somewhere to get there, perhaps not far by taxi or private car, but just possibly on a feeder service; even those joining the route at Kings Cross. This suddenly becomes a fair bit trickier if those feeders are closed down on the basis of their poor financial performance. Are we to assume that the passenger travelling from, say, Bury St Edmunds to Middlesbrough is still going to want to consider travelling by rail given that the train will only take them from Peterborough to Darlington?

I think you're going to have to walk me through this one, because simply stating that it is so doesn't enlighten me any.
 

Watershed

Veteran Member
Associate Staff
Senior Fares Advisor
Joined
26 Sep 2020
Messages
11,948
Location
UK
Yes you did, in a rather matter-of-fact "take it or leave it" tone without any further explanation.

Given that the hunt for the profitable core seems to carry some sort of mythical status suggests that proving it's existence might be hard to do. Quite apart from the problems proving the issue by picking apart the revenue and costs already outlined above, it's not clear whether you mean that the East Coast route in it's entirety is profitable, including the infrastructure and all other operating costs, or if you're simply making the case that the relevant TOCs (presumably LNER and GTR GN/TL) are showing operating profits. It is perhaps worth noting also that, although LNER is paying an operating premium, it is getting a slightly easier ride as an operator of last resort than either of the previous two franchised operators did. It would be interesting to speculate (or maybe it is even provable) just how VTEC might have compared during the last operating period compared to LNER.

Even if we allow the assumption based on TOC operating profits, these services do not operate in a vacuum. People arriving at East Coast route interchanges will have travelled from somewhere to get there, perhaps not far by taxi or private car, but just possibly on a feeder service; even those joining the route at Kings Cross. This suddenly becomes a fair bit trickier if those feeders are closed down on the basis of their poor financial performance. Are we to assume that the passenger travelling from, say, Bury St Edmunds to Middlesbrough is still going to want to consider travelling by rail given that the train will only take them from Peterborough to Darlington?

I think you're going to have to walk me through this one, because simply stating that it is so doesn't enlighten me any.
I can see where Bald Rick is coming from on this one. It doesn't take an expert to calculate that the number of London-Edinburgh, London-Leeds etc. passengers vastly outweighs all the Bury to Boro, Cambridge to Bradford, Sleaford to Sunderland etc. passengers put together.
 
Status
Not open for further replies.

Top