UK rail franchises state run by other countries - revenue and their economies

[Clansman]

Bit of an unusual question I'm asking here. In light of a few newspaper articles reporting Abellio are struggling with the running of the Scotrail franchise, I wondered how much are economies with TOC operators in this country are making by operating our railways (and not even to the highest standard either!).

For example, the following operators which are subsidiaries of countries outwith the UK:

Deutsch Bahn and Arriva (Germany)
Wales & Borders, Cross Country, Northern, Chiltern, London Overground

Abellio (Netherlands)
Scotrail, Greater Anglia

So looking at the above, we can see that many of our rail franchises are operated by subsidiaries of government owned business in Germany and Netherlands, so how much revenue from these TOCs goes directly into their respective economies - and why can't we do the same for ourselves?

Apologies if this has been discussed before or I sound daft, just pondering

 

[najaB]

So looking at the above, we can see that many of our rail franchises are operated by subsidiaries of government owned business in Germany and Netherlands, so how much revenue from these TOCs goes directly into their respective economies - and why can't we do the same for ourselves?

Apologies if this has been discussed before or I sound daft, just pondering

Take a look at this thread:
http://www.railforums.co.uk/showthread.php?t=133065

 

[thenorthern]

It does happen in other countries although with private companies as National Express operate trains in Germany and Arriva operate things all over Europe but they are now owned by the German State Railways.

A big difference though is in the United Kingdom other than Network Rail and Northern Ireland railways I don't think think there is any state owned public transport operators left.

Profit margins for TOCs are normally around 7% but some of that is re-invested in the railways.

 

[gimmea50anyday]

DRS is owned by British Nuclear Fuels, a government agency....

 

[route:oxford]

Bit of an unusual question I'm asking here. In light of a few newspaper articles reporting Abellio are struggling with the running of the Scotrail franchise, I wondered how much are economies with TOC operators in this country are making by operating our railways (and not even to the highest standard either!).

Isn't the Scottish Goverment "owned" by the owner of Stagecoach?

 

[TRAX]

Isn't everything owned by Brian Souter ?

 

[northwichcat]

For example, the following operators which are subsidiaries of countries outwith the UK:

Deutsch Bahn and Arriva (Germany)
Wales & Borders, Cross Country, Northern, Chiltern, London Overground

Abellio (Netherlands)
Scotrail, Greater Anglia

That's a small part of the overall picture. Merseyrail are part owned by Abellio, while all Govia franchises are a consortium between a British and a French company. While Grand Central isn't a franchised operator it competes with franchised operators so I don't think it should be forgotten about.

While if you want to look at the bigger picture of railways in the UK Eurostar International Limited (the company responsible for Eurostar services to/from Britain) is part owned by SNCF and SNCB - which is fair enough. However, what was the 40% British stake was sold to Hermes (who got 10% of the overall ownership) and Caisse de dépôt et placement du Québec (who got 30%.) The latter is an investment bank belonging to the National Assembly of Quebec, who also own 30% of Bombardier Transportation. So an order of new trains being built in Derby is good news for the residents of Quebec!

 

[TRAX]

Govia franchises are a consortium between a British and a French company.

Govia is a joint-venture between Go-Ahead (65 %) and Keolis (35 %), Keolis being a subsidiary of SNCF.

 

[LNW-GW Joint]

Keolis is 70/30 owned by SNCF and CdpQ of Canada.
Not to forget MTR (LOROL 50%, TFL Rail, Crossrail) which is owned in Hong Kong with the HK government as the largest shareholder.
HS1 (the infrastructure) is managed (not owned) by two Canadian pension funds.
Heathrow Express and the airport branch is owned by HAH which is owned by a consortium led by Ferrovial of Spain.

 

[daikilo]

It is important to be clear about the disnction between owned and operated. For instance Great Central is owned by Arriva group whereas arriva trains Wales are just an operator of the franchise.

That said, to return to the original question which I think was essentially around where any profits go or who is actually benefitting from running our trains. For those which are franchised, the operator will either take or share profits after the franchise commitments are met with regard to government contributions (positive or negative).

The current case of GTR is interesting as they clearly are not meeting their franchise operating requirements yet could in theory be saving more than it is costing in revenue. Indeed, what is the incentive to change unless they are financially penalised or threatened with losing the franchise

Finally, I remain intrigued as to why Great Central is allowed to run trains with no commitment to send a proportion of profits to the government yet most/all other TOCs in the region are making contributions of some sort.

 

[ainsworth74]

Finally, I remain intrigued as to why Great Central is allowed to run trains with no commitment to send a proportion of profits to the government yet most/all other TOCs in the region are making contributions of some sort.

Because they're an Open Access Operator and stand or fall on their own two feet as there is no subsidy from Central Government available. If Grand Central cannot make money they go bust and the services stop end of discussion which is not something that will happen to a franchised service. The operator my fail (see GNER and NXEC) but the services will still be run (by the DfTs operator of last resort Directly Operated Railways).

 

[pdeaves]

If Grand Central cannot make money they go bust and the services stop end of discussion.

Which, of course, happened to Wrexham Shropshire & Marylebone Railway.

 

[WatcherZero]

UK state owned Network Rail operates quite a few consultancy and design contracts in the middle east and elsewhere.

Our state owned airports used to have contracts to run quite a few airports in the USA.

 

[Rich McLean]

Because they're an Open Access Operator and stand or fall on their own two feet as there is no subsidy from Central Government available. If Grand Central cannot make money they go bust and the services stop end of discussion which is not something that will happen to a franchised service. The operator my fail (see GNER and NXEC) but the services will still be run (by the DfTs operator of last resort Directly Operated Railways).

DOR no longer exists. There is however a new operator of last resort, but with some funky name that nobody can remember.

 

[ainsworth74]

DOR no longer exists. There is however a new operator of last resort, but with some funky name that nobody can remember.

Well same difference then

 

[daikilo]

Because they're an Open Access Operator and stand or fall on their own two feet as there is no subsidy from Central Government available. If Grand Central cannot make money they go bust and the services stop end of discussion which is not something that will happen to a franchised service. The operator my fail (see GNER and NXEC) but the services will still be run (by the DfTs operator of last resort Directly Operated Railways).

Well yes, but if they make profits then they keep them whereas VTEC has to make a contribution per the franchise award.

That said, I was trying to concentrate on the more general question of where profits go, assuming there are some, and who actually owns what in terms of the train operatiom. Grand Central owns their operation (even if they lease the trains) whereas VTEC does not, they have franchised a DfT plan for a finite time-period.

 

[thenorthern]

Don't forget as well the Virgin Share in Virgin Trains is ultimately owned by Virgin Group Investments Limited which is based in Road Town, British Virgin Islands.

 

[WatcherZero]

Well yes, but if they make profits then they keep them whereas VTEC has to make a contribution per the franchise award.

That said, I was trying to concentrate on the more general question of where profits go, assuming there are some, and who actually owns what in terms of the train operatiom. Grand Central owns their operation (even if they lease the trains) whereas VTEC does not, they have franchised a DfT plan for a finite time-period.

All are franchised operations with the exception of;

Merseyrail and London Overground: Management contract, track is owned by Network Rail.
Eurostar: Owned by the tunnel owner.
Heathrow Express and Heathrow Connect: Owned by Heathrow airport as they funded the track.
Tfl Rail: Management contract, TFL is owner of Crossrail track
Hull Trains, Grand Central: Open Access operators

 

[coppercapped]

Well yes, but if they make profits then they keep them whereas VTEC has to make a contribution per the franchise award.

That said, I was trying to concentrate on the more general question of where profits go, assuming there are some, and who actually owns what in terms of the train operatiom. Grand Central owns their operation (even if they lease the trains) whereas VTEC does not, they have franchised a DfT plan for a finite time-period.

It seems to me that there is a confusion between premium payments to the DfT that some TOCs make and the distribution of profits.

The franchise system is a method of state funding train operations which make a loss in financial terms which are being operated because the Government wishes them to be operated. It pays the TOC to run these services and this amount is sometimes called 'profit'. In some cases the revenue generated is greater than the costs of operating the services - in this case the TOC pays the DfT a premium, the level of which is defined in the franchise agreement.

To make it worthwhile for the TOC's owning group to operate the services the DfT allows the TOC - whether in receipt of a subsidy or whether it returns premium payments to the DfT - to retain an amount each year as profit. This usually about 3% of revenue (not 7% as was stated earlier). This amount will either be retained by the owning group or distributed to its shareholders as it, the owning group, thinks fit.

An Open Access Operator takes all the risks of running the service and has no agreement with the DfT. It does have permission to run trains from the ORR which may be granted if the operator meets certain conditions. What it does with its profit is its business - and if it makes no profit it stops operation.

 

[thenorthern]

For many years I don't think Grand Central was profitable which is probably still the case today.

 

[najaB]

For many years I don't think Grand Central was profitable which is probably still the case today.

Arriva must have deep pockets.

 

[ainsworth74]

For many years I don't think Grand Central was profitable which is probably still the case today.

As far as I'm aware Sunderland is now profitable and has been for some time whilst Bradford is a bit of an economic basket case but presumably still performing/growing in line with their business plan as they haven't given up yet!

 

[northwichcat]

All are franchised operations with the exception of;

Merseyrail and London Overground: Management contract, track is owned by Network Rail.

The interesting thing is for a British franchise usually a franchisee doesn't chose the brand name or branding, it's set by the franchisor. For instance, Selwyns operate National Express services using National Express branded coaches which fit the specification set by National Express.

However, with rail that only happens with so called management contracts - even with Northern the ITT specified the trading name must include either 'Northern' or 'Rail North', which allowed a number of different trading names to be used - Arriva Trains Northern and Northern Spirit would have both fitted that description!
--- old post above --- --- new post below ---

DOR no longer exists. There is however a new operator of last resort, but with some funky name that nobody can remember.

Well same difference then

Slight difference as the new company is a consortium of 3 privately owned British companies - one of which is Ernst & Young who have faced criticism for using a loophole to pay a lower rate of tax in Luxembourg. When the RMT catch up with what happened in 2015 I'm sure they'll make a big fuss about that. (They still refer to the contents of the Northern Rail franchise consultation document opposed to the actual franchise agreement or even the ITT.)

 

[pdeaves]

DOR no longer exists. There is however a new operator of last resort, but with some funky name that nobody can remember.

Operators of last resort have been:
Abbey Rail Limited (became East Coast Main Line Company Limited);
Broadway Rail Limited (became West Coast Main Line Company Limited);
Goldings Rail Limited (became Thameslink Limited);
Hay's Rail Limited (became Cross Country Trains Limited);
OQS Rail Limited (became EM Trains Limited);
Orchard Rail Limited (became London Midland Trains Limited);
Strutton Rail Limited (became GW Railway Limited);
Tower Rail (became South Eastern Trains Limited);
Westminster Rail Limited.

Do not be confused by the 'became' names; most were set up in case negotiations with the incumbents failed and never ran trains (Tower Rail/South Eastern being a notable exception).

Merseyside Passenger Transport Services Limited;
Rail for London Limited (on behalf of Transport for London);
SOLR1 Limited (subsidiary of the Scottish Ministers);
SOLR2 Limited (subsidiary of the Scottish Ministers).

WatcherZero is not quite right as Eurostar has never been owned by the tunnel owner/operator (Eurotunnel).

More details here: http://www.railwaycodes.org.uk/licences/licence0.shtm.

 

[WatcherZero]

Eurostar was created and owned individually by Eurotunnel nations in an informal split for national railway companies according to commercial tunnel funding (London Continental, SNCF, Belgium). The Tunnel the other half of the equation was privately funded. In 2010 the holdings were formed in to one company Eurostar International Limited, in March 2015 the Treasury sold its 40% stake in the company to a couple of pension funds.

 

[Xenophon PCDGS]

Operators of last resort have been:
Westminster Rail Limited.

Do not be confused by the 'became' names; most were set up in case negotiations with the incumbents failed and never ran trains (Tower Rail/South Eastern being a notable exception).

What role was ever played by Westminster Rail Limited?

 

[pdeaves]

What role was ever played by Westminster Rail Limited?

By the looks of things, none yet.