Network Rail opens door for market reform

A raft of new measures aimed at encouraging third-party competition and private investment in Britain's rail industry has been announced, in response to the Hansford Review for Network Rail.

By the end of 2017 Network Rail's now largely devolved route teams will publish pipelines of projects they want to put out to market – as part of 'sweeping reforms' announced today designed to open up the rail infrastructure industry to third-party competition and private investment. The new measures have been revealed in response to Peter Hansford's review on contestability for Network Rail published alongside the reforms.

Hansford's review on 'Unlocking investment, building confidence and reducing costs', completed in June, comes as the latest in a series of reports, by Roy McNulty, Collette Bowe and Nicola Shaw, looking at rail industry reforms; and builds on Network Rail's own internal changes which have brought about the devolution of management of track and signalling and other infrastructure into nine area-wide 'routes' – seven across England, one each for Wales and Scotland and one 'virtual route' for freight and cross-country services.

Hansford makes 12 key recommendations, including that Network Rail appoints specialist commercial capability within each route and demonstrates a commitment to creating a contestable market. He also calls for more support for routes' engagement with third party investors and for cultural behaviour change to create a more 'welcoming, predictable and trusting environment, to provide more cost and risk certainty'.

In response, Network Rail chief executive, Mark Carne, has released details of the latest reforms, including routes' project pipelines open for third-party investment, plus a 'swathe' of third-party project champions to be appointed by route teams to work with delivery organisations, investors and funders to make their projects work. Carne also pledges more flexibility to Network Rail's standards, maintaining safety but aiming for more innovation, and he's launching a new reward scheme whereby money saved from a new idea will be shared with the company that introduces it.

"By welcoming open competition into the core of our business we will increase the pace of innovation, creativity and efficiency and could deliver even more improvements to our railway and for the people that use and rely on it every day," Carne said. “I am determined to create an environment where innovative third party companies can compete for and directly deliver railway projects. These reforms mark the next stage of Network Rail's transformation having already decentralised into nine devolved individual businesses."

Carne also said he's determined to find ways of bringing more private investment into Britain's rail projects, but acknowledges it's not going to be easy for a government-owned organisation. One of the first examples of innovative use of private finance is Network Rail’s new two-year deal with the signalling and train control specialist Resonate, which will introduce its digital traffic management system into the signalling and control systems for the main lines out of London Paddington. Resonate is financing and bearing the risk of introducing the new technology but will reap rewards from the savings made in reducing delays.

Industry has reacted warmly to Network Rail's latest reform plans. Balfour Beatty group chief excecutive, Leo Quinn, said the changes "should provide a steadier flow of investment, moving away from the stop-go nature of a regulatory cycle". Costain chief executive, Andrew Wyllie welcomed the proposals as "innovative thinking in the way critical rail infrastructure is delivered in the UK".

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