• 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!

The Future Of ROSCO's

Status
Not open for further replies.

Harvey B

Member
Joined
11 Mar 2019
Messages
980
Does anyone know whats happening to ROSCO's now that franchising is scrapped?
Will all rolling stock be taken over by the DFT and leased to TOC's Or Will ROSCO's be staying?
 
Sponsor Post - registered members do not see these adverts; click here to register, or click here to log in
R

RailUK Forums

rebmcr

Established Member
Joined
15 Nov 2011
Messages
3,845
Location
St Neots
Overground-style "Concessions" (which I reckon is what we'll end up with) are compatible with traditional ROSCOs, indeed Overground itself leases the Class 378s from QW Rail Leasing.
 

edwin_m

Veteran Member
Joined
21 Apr 2013
Messages
24,792
Location
Nottingham
They won't disappear unless the government decides to buy them out, which will effectively mean striking a deal to put a price on all the rolling stock they own. I can't see the government spending money on that right now, despite DfT's past objections to ROSCOs. When the Competition Commission looked into that they found most of the problems were due to the franchising system, so maybe will disappear with that being abolished.

The government could decided to buy rolling stock itself rather than leasing, as Scotland has sort of done, so that the ROSCOs' roles gradually diminished as older fleets were withdrawn. But they'd still be with us for several decades.
 

Wyrleybart

Established Member
Joined
29 Mar 2020
Messages
1,623
Location
South Staffordshire
It would cost billions to transfer fleet ownership to the goverment, and for what reason ?

I strongly suggest Roscos will remain as is, but their customers will change
 

hwl

Established Member
Joined
5 Feb 2012
Messages
7,354
They won't disappear unless the government decides to buy them out, which will effectively mean striking a deal to put a price on all the rolling stock they own. I can't see the government spending money on that right now, despite DfT's past objections to ROSCOs. When the Competition Commission looked into that they found most of the problems were due to the franchising system, so maybe will disappear with that being abolished.

The government could decided to buy rolling stock itself rather than leasing, as Scotland has sort of done, so that the ROSCOs' roles gradually diminished as older fleets were withdrawn. But they'd still be with us for several decades.
Scotland effectively went down the route of long term leases as TfL have done for LO. In both TfL and TS cases the the main party (bank) in the leasing company is SMBC
 

Domh245

Established Member
Joined
6 Apr 2013
Messages
8,426
Location
nowhere
It would cost billions to transfer fleet ownership to the goverment, and for what reason ?

I strongly suggest Roscos will remain as is, but their customers will change

Agreed that we won't see the current fleets transferred to governments, but I fully expect that they'll continue to exist for new fleets as well. I think the optics of spending £hundreds of millions of government money (even if, as discussed in a previous thread on this topic, it's cheaper in the long run because of the better borrowing rates) on a new train fleet isn't something a government would want. "£1 billion for new trains for london commuters? You should have spent that money on are NHS!1!"
 

SteveM70

Established Member
Joined
11 Jul 2018
Messages
3,799
The last thing the current government will want is massive capex at a time when money has rarely been tighter
 

hwl

Established Member
Joined
5 Feb 2012
Messages
7,354
Agreed that we won't see the current fleets transferred to governments, but I fully expect that they'll continue to exist for new fleets as well. I think the optics of spending £hundreds of millions of government money (even if, as discussed in a previous thread on this topic, it's cheaper in the long run because of the better borrowing rates) on a new train fleet isn't something a government would want. "£1 billion for new trains for london commuters? You should have spent that money on are NHS!1!"
In the last decade the only government involvement in purchase (rather than via a TOC) for innovation reasons (IET - but now ROSCOs are doing follow on orders of family products 802 / 805 / 807 / 810 etc) or big orders that were thought to be too big for ROSCOs (Thameslink, Crossrail and IET) - all are effectively leased. There won't be anything similar again till HS2 and there is a good chance they will manage to set something up there leasing wise nearer the time (sale and lease back after having actually go the delivery of the first train to de-risk things).
 

Nogoohwell

Member
Joined
14 Aug 2020
Messages
52
Location
London
There are three competitive advantages to ROSCO's as opposed to government. First is you have cash rich pension companies wanting a long term safe investment, so there will always be competition which leads to better deals. There is no way we would have seen the massive fleet replacement programmes under government ownership which looks at this as a cost, not an investment.
Secondly the ROSCO has an incentive to maintain the value of its investment for future resale, so it has to keep investing in it.
Finally you have multiple ROSCO's, so multiple customers for the train builders to compete for, as opposed to one central customer, helps drive costs down and innovation.

You could argue that the ROSCO's have been the most successful part of privatisation as it does offer competition.

To make ROSCO's really competitive you would need to be able to take a train from one franchise and move it to another. With multiple traction types, gauge clearances and union acceptance, you cant easily do this so this stops it being fully effective.

EDIT: Would be nice to have a central strategy for renewal but that then takes it back to government control and that clearly did not work too well under BR.
 

Mcr Warrior

Veteran Member
Joined
8 Jan 2009
Messages
11,648
Secondly the ROSCO has an incentive to maintain the value of its investment for future resale, so it has to keep investing in it.
How exactly did that work with Pacer units being kept in service for so long? :s
 

Darandio

Established Member
Joined
24 Feb 2007
Messages
10,672
Location
Redcar
How exactly did that work with Pacer units being kept in service for so long? :s

Certainly an exception as they knew there was no possibility of future resale. The incentive they did have was initially receiving them for pennies and rinsing TOC's for millions every year for as long as they possibly could.

I wonder how much the Pacer fleet alone generated in revenue for the ROSCO's since they received them. Surely it's potentially in the billions?
 

AndrewP

Member
Joined
5 Sep 2011
Messages
368
I am sure the ROSCOs will stay but hopefully now they can work together with the government for a long term traction plan which includes sensible replacement plans, cost effective improvements, reduced micro fleets and good value for UK plc as well as sensible returns for the ROSCOs

Or is common sense and logic too much to ask?
 

edwin_m

Veteran Member
Joined
21 Apr 2013
Messages
24,792
Location
Nottingham
I am sure the ROSCOs will stay but hopefully now they can work together with the government for a long term traction plan which includes sensible replacement plans, cost effective improvements, reduced micro fleets and good value for UK plc as well as sensible returns for the ROSCOs

Or is common sense and logic too much to ask?
Not sure if a "sweet spot" exists between unfettered competition on the one hand, and the risks of a public-private partnership on the other.
 

DB

Guest
Joined
18 Nov 2009
Messages
5,036
EDIT: Would be nice to have a central strategy for renewal but that then takes it back to government control and that clearly did not work too well under BR.

It should be perfectly possible to come up with a collaborative approach to this. The current system clearly doesn't work very well, with the Pacers (and I would also argue 150s) staying in service for longer than they should, and on the other hand units (EMUs) which are fairly new or have recently had extensive refurbishment going off-lease before they should. These issues could be avoided with a coherent cascade plan, which could include broad specifications for new fleets required, and ROSCOs could then offer what they thought met those specifications via a tendering process.
 

AndrewP

Member
Joined
5 Sep 2011
Messages
368
Not sure if a "sweet spot" exists between unfettered competition on the one hand, and the risks of a public-private partnership on the other.

I genuinely believer there is a sweet spot where any contract arrangement can be mutually beneficial. You are right to bring up risk as the level of risk transfer is so important in getting value and interest.

As for competition, by having one supplier all costs will be known and therefore benchmarked and if one type of train (or any asset) costs more from supplier A than supplier B then questions asked and reasons understood - they may be valid or not, e.g. much more intensive use - so that different suppliers will no longer be able to get away with charging more than others for the same or very similar products
 

Meerkat

Established Member
Joined
14 Jul 2018
Messages
7,415
One man’s coherent cascade plane is another man getting unsuitable cast offs dumped on them.
Would travellers (not enthusiasts!) in East Anglia have rather foregone their shiny new trains and got ECML’s unreliable rejects again?
 

edwin_m

Veteran Member
Joined
21 Apr 2013
Messages
24,792
Location
Nottingham
It really depends what franchises will look like going forward.

If it follows the concession model (Overground etc) then the public sector will procure the trains whether by outright purchase (maybe sale and leaseback later) or by a leasing deal that would probably run for the lifetime of the train. The franchisee will operate them and maintenance will be some combination of franchisee, owing company and supplier. If they aim to introduce more innovation then they may let the franchise bidder make the decisions on rolling stock as most of them have up to now - but then the leases would only be for the franchise term.

I was reading recently, I think it was Roger Ford, about the recent entrants to the leasing market and their preference for "sticky" leases where the train is effectively bespoke so would be difficult to replace at the end of a franchise term. This presumably also means that the train design can't easily be used other than on its intended route. It is the opposite of the traditional ROSCO approach where they have aimed for maximum standardization so (among other reasons) if a new franchisee doesn't want them there is the best chance of deploying them elsewhere. I do wonder if the sticky approach is just another way of stifling competition (if the trains can't be replaced then the owner can name their price once the original lease expires) or, conversely, if there isn't a risk of a competitor muscling in with a new and equally sticky design leaving the original owner with a useless asset.
 

DB

Guest
Joined
18 Nov 2009
Messages
5,036
One man’s coherent cascade plane is another man getting unsuitable cast offs dumped on them.
Would travellers (not enthusiasts!) in East Anglia have rather foregone their shiny new trains and got ECML’s unreliable rejects again?

So what's your solution? New trains all round every time something is withdrawn?
 

43096

On Moderation
Joined
23 Nov 2015
Messages
15,159
Certainly an exception as they knew there was no possibility of future resale. The incentive they did have was initially receiving them for pennies and rinsing TOC's for millions every year for as long as they possibly could.

I wonder how much the Pacer fleet alone generated in revenue for the ROSCO's since they received them. Surely it's potentially in the billions?
Wondered how long it would be before the usual stereotype was trotted out....
 

DB

Guest
Joined
18 Nov 2009
Messages
5,036
I was reading recently, I think it was Roger Ford, about the recent entrants to the leasing market and their preference for "sticky" leases where the train is effectively bespoke so would be difficult to replace at the end of a franchise term. This presumably also means that the train design can't easily be used other than on its intended route.

I can't actually think of many examples where that applies in practice. Pendolinos, perhaps. Shorter IEP vehicle-lengths for midland mainline, possibly - but even then those lengths are only what's been normal up until the IEPs appeared. Can't immediately think of anything else.
 

Meerkat

Established Member
Joined
14 Jul 2018
Messages
7,415
So what's your solution? New trains all round every time something is withdrawn?
well that would be normal - you depreciate the asset and replace it when it’s knackered.
Cascade of old stuff is basically the victim service subsidising the business case of the initial user. Fair enough if it is suitable for their needs/budget, but not if the victim service is capable of justifying its own new stock.
Yet the latter part is a perfectly valid question. Have you got an answer or not?
In a normal market the ROSCO wouldn’t have made huge profits on the Pacers as they would have paid an appropriate amount for them as part of what they paid the government at privatisation. If they did make an inordinate profit that would be due to the DfT allowing them to be used much longer than predicted and the Labour Party‘s unfulfilled promises of nationalisation reducing privatisation bidding prices.
Presumably only the first ROSCO owners made the huge profits out of the Pacers as the later (multiple) sales of the businesses would have paid a much higher price for the right to lease them out.
 

Wyrleybart

Established Member
Joined
29 Mar 2020
Messages
1,623
Location
South Staffordshire
Perhaps a Rosco with it's business head on and crystal ball fired up would have looked at the 17039x batch and ordered a batch of 17239x similarly. There would be any number of scenarios where they would have been deployed on leases which went from short, to medium, to long, to pretty damn permanent.
Cumbrian Coast
Fife
Chiltern
Chiltern slam door replacement
Etc
Etc
Etc

I cannot recall a single series built DMU that was withdrawn from use for lack of work, the nearest probably being the 151s which were seriously non standard anyway. What about those 150/0s still soldiering on.


So yes I think the Roscos missed a trick
 

43096

On Moderation
Joined
23 Nov 2015
Messages
15,159
In a normal market the ROSCO wouldn’t have made huge profits on the Pacers as they would have paid an appropriate amount for them as part of what they paid the government at privatisation. If they did make an inordinate profit that would be due to the DfT allowing them to be used much longer than predicted and the Labour Party‘s unfulfilled promises of nationalisation reducing privatisation bidding prices.
Presumably only the first ROSCO owners made the huge profits out of the Pacers as the later (multiple) sales of the businesses would have paid a much higher price for the right to lease them out.
You are confusing two different things: the book value of the individual asset and the price paid for the entire business (the ROSCO). Ultimately the business is only worth what someone is willing to pay for it, that can be less than, more than or the same as the book value of the assets and liabilities of the company.
 

Meerkat

Established Member
Joined
14 Jul 2018
Messages
7,415
You are confusing two different things: the book value of the individual asset and the price paid for the entire business (the ROSCO). Ultimately the business is only worth what someone is willing to pay for it, that can be less than, more than or the same as the book value of the assets and liabilities of the company.
Doesn’t the book value of the asset reflect the price paid for it as part of the business?
Assuming you are correct (I am no accountant) the ROSCO has not made huge cash profits for it’s owners if they have effectively paid a true market price for buying the right to lease that asset (which the initial ROSCO owners didn’t, but later buyouts presumably did)
 
Status
Not open for further replies.

Top