The report comes from this week’s CNBC UK Exchange Newsletter. Every Wednesday, Ian King brings you expert insights on the most important business stories in the UK and other key developments you don’t want to miss. Like what you saw? You can subscribe here.
Scheduling
After about 31 years of privatization, the British railway will return public ownership.
The country’s rails, stations, tunnels and signals were effectively relocated in 2002, but this was the policy of the current Labor Administration when it was elected last year to bring the operation of the train itself back to the state.
Only rolling stocks – coaches, locomotives and vans – Most rail operators have to be in the hands of private hands, with one important exception we are going to come.
So in May this year, the railway franchise (re-from Southwest Railway) responsible for the trains to and from London Waterloo was sent back to state ownership.
Properly, for British people of a certain age, they remember the shabby trains and shocking services of the old British railway, the first nationalization service involved a railway replacement bus.
The relearning process will continue, with C2C running between London and Essex later this month to be brought into state ownership, while Greater Anglia will operate trains in East England in the coming months.
With four operators – London North Railway (LNER), North, Southeast and Transpennine Express – already state-owned, the government has assured that by the end of this parliament, all remaining private railway franchise will be re-learned.
It also intends to incorporate train and tracking operations into a new entity, the Great British Railway, ending the separation of network and train operations during privatization.
A Lner train seen on the King’s Cross.
SOPA Images | lightrocket | Getty Images
But this is not the end of the story.
Although debates remain on whether rail privatization is successful – on the plus side, this leads to a huge increase in passenger count and better rolling stocks; on the other hand, this leads to higher fares – a positive fare that most industry experts believe is the emergence of so-called “open access” operators.
These compete with now nationalized franchisees, which contracted with the government to run services. Unlike franchisees, open access operators take all ticketing risks, while other revenues are not expected.
Their presence is most acute on the main line of the East Coast, which connects Edinburgh with London and serves Yorkshire, East Midlands and Northeast England.
Open access operators like Lumo and Hull Train to raise the bar and lower the fare. It is worth noting that the main line of the East Coast is the only part of the British rail network where passenger counts are restored to pre-popular levels.
Despite these achievements, open access is not universally popular. The power of Britain The railway union hates it Therefore, it has long been suspected that it is a civil servant of the Ministry of Transport (DFT). It has become a more focused because over the past year Record the number of applications Trains opened by the company operate trains under open access.
This prompted Heidi Alexander, the new transport minister Strict method Towards open access to the application.
She ordered him to consider whether there is sufficient capacity on the rail network for new services and raised concerns that open access operators do not meet the cost of track access. She also told him to be careful whether new operators will deprive existing operators of revenue.
This raises concerns that Alexander may just be bidding for rail unions and hopes to protect state-owned operators like Lner from the blast of the race. When Richard Goodman, one of the senior civil servants in DFT, wrote to Collier at the end of June Strengthen Alexander’s message.
He wrote: “DFT analysis shows that the total annual abstraction for each open access application will be as high as £229 million (price 24/25), without taking into account the revenue impact of these services’ interactions.”
“This is a huge additional fee for taxpayers and will have a significant impact on the funds available to the Secretary of State.”
Some believe the letter is intended to discourage ORR from approving a new application.
If so, this strategy seems to have worked.
Last week, ORR rejected applications from three companies seeking a tracked access contract with Network Rail to run services on the West Coast mainline, which connects Glasgow to London and serves major cities including Birmingham, Liverpool and Manchester.
“It’s obvious that there isn’t enough capacity to approve any service without a serious negative impact on the level of train performance passengers experience on the West Coast main line,” ORR’s Stephanie Tobyn said in an explanation of the decision.
Among those lockdowns are Richard Branson’s Virgin Train, a franchisee on the main line of the West Coast, which is a “hit to consumer choice and competition.”
The news also disappoints businesses in countries currently under-service in existing networks. A good example is Shropshire, where there is a plan for a new operator, Wrexham, Shropshire and Midlands railways, owned by French rolling stock maker Alstom, running five trains a day between Shropshire and London.
All of this raises concerns that Alexander and Railway Secretary Peter Hendy are determined to kill open access (what their operators are too expensive to re-enable will be fully cost-effective.
This is incorrect for the Ministry of Transport.
“We support open access services, which encourage growth, improve connectivity and provide passengers with more options,” a DFT spokesperson told CNBC. “But open access should not pay taxpayers and should not negatively impact performance.”
Geographical divide
The debate over public access could lead to conflicts within the government.
Although now a member of MP for Swindon, Wiltshire, Alexander spent her entire career in local and national politics in London. Hendy also spent his career in the capital, mainly working for state-owned transport for London and its former London Transport Company. Therefore, their thinking about railways has been understood by the capital’s transportation system, which is very different from other parts of the country.
Other senior figures in the administration, such as Home Secretary Yvette Cooper and Education Secretary Bridget Phillipson, may have other views. The couple representing constituencies in Yorkshire and Northeast respectively and will know how popular open operators are among one of the voters who maintain competition and drive price drops.
They may also be able to rely on the support of Prime Minister Rachel Reeves, whose constituency is located in Leeds, Yorkshire’s largest city has not yet enjoyed direct services from open operators.
Members of Congress representing seats at stock manufacturers such as Alstom, Siemens and Hitachi can also expect to support thousands of skilled manufacturing jobs.
Alstom and Siemens have recently warned that ministers failed to sign a new order backlog, while Hitachi won a £500 million contract from Lumo, offering 14 new trains last December.
Anyway, Alexander and Hendy should have other priorities. For example, it is not clear when the great British Railway will be officially launched, or who will become CEO.
There is also the running soreness of the HS2, which originally aimed at building a new high-speed rail between London and the Central Region and London and the city north of England, but will now Run to Birmingham only And lagged behind the plan for two years, exceeding the budget billions.
Meanwhile, taxpayer subsidies have been making up before the pandemic as railways approached daily operating expenses.
In 2022-23, nearly available figures, government support for railways totaled £21.1 billion, up 64.5% from pre-pandemic levels, while passenger revenue was only £9.2 billion, down 31% before the pandemic levels.
The growth in working from home means commuters are unlikely to return to pre-pandemic levels. This means that if the total number of passengers is to be rebuilt, the railway will have to do more to attract leisure travelers. This is a task that is perfect for open access operators with innovative experience in fares and services.
– Ian King
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Need to know
On the market
UK FTSE 100 People have been in good shape over the past week, with temporary growth of about 0.65% and a record high of about 0.35% in June.
If you missed it, fundraising for London IPOs fell to at least Thirty-year low In the first half of this year – new questions were raised about the charm of the UK as a global capital hub.
The Financial Times Stock Exchange 100 index has performed over the past year.
A perceived Lack of strong support Her prime minister last week as the British Treasury minister, both the currency and government bond markets hit the attack. this GBP The current trading price is around $1.35 to $1.37 – prices until June 2.
Similarly, Gold plating yield The current trading price is 4.63%, not yet back to the levels seen before the Parliamentary Showdown began.
