21 Dec 2017

Mark Carne top table dinner – Network Rail Chief Executive: 10 Key points

Linkedin

Mark Carne, the Chief Executive of Network Rail, kindly joined Stephenson Harwood and Atkins on Thursday 14 December 2017 for a top table dinner. Mark gave interesting insights to an engaged audience on Network Rail post Hansford Review: modernisation, dealing with devolution and introducing contestability for infrastructure projects. There followed an active debate around the tables and into the evening. If you attended the dinner, thank you for your contribution.

The following are our notes of the top 10 key points arising from the discussions.
 

  1. Good news travels fast: We need to focus on the successes of the railway, such as the amazing feat of engineering at London Bridge, transformation in Scotland and the introduction of new fleets of trains to the network, including on the Great Western Railway. Too often, the railways industry and the media focus on the negatives – about what doesn't work, what needs to improve and how to restructure (yet again). Whilst the railway is a victim of its own success with more passengers and other users than ever before, there is so much good news to share.
  2. Contestability brings new ideas: Contestability is not just about reducing costs for the industry: it can bring innovation, new ways of working and – importantly - new people into the industry. Much like Mark has brought ideas to the railway from the oil sector, new people can offer experience from other industries – perhaps drawing parallels with what works well elsewhere. The rail industry should not be seen as a "special case" in this respect. Contestability will also offer more choice to Route Managing Directors currently tied into using Network Rail, as well as increasing the level of information and understanding as to how the railway works.
  3. Network Rail may not always be the best to deliver: Network Rail is often seen as the only organisation who can deliver infrastructure projects – as it will usually then operate the infrastructure. This should not always be the case – enhancements in particular is an area where there is scope for wider industry involvement. Sometimes, train operators should take the lead – perhaps where passengers will benefit the most. Network Rail should be open to sharing the benefits gained with those train operators where they can deliver projects in a cheaper, more efficient way than Network Rail. This model is being used at Robroyston Station and could be rolled out. That said, as System Operator, Network Rail will always need to have a co-ordinating role so that the railway network is considered on a system-wide basis.
  4. People who use the railway should specify what is needed: There is a distinction between renewals, maintenance and enhancements. Where the railway is being enhanced, this should only be done where passenger and freight operators demand that it is done, and where the benefits for the end customer are greatest. In return for this, there also needs to be a way to ensure that beneficiaries pay. For example, if railway enhancements are needed to serve a new housing development, why should the tax payer – rather than the developer (or even new homeowners) – pay for that. Network Rail should not be seen as the mythical magic money tree: if someone wants an enhancement, they will need to pay for it, but should have greater involvement in its development as a result.  Unlocking value by, for example, capturing increases in land value and ensuring beneficiaries pay is likely to be a theme for future projects.
  5. Funding for railways has never been greater: The statement of funds available (SOFA) issued by the Government for the next 5 years is large: just under £48bn. This is a 24% increase from the current 5-year period and is to be spent on maintenance and renewals. But this will not cover everything. Intelligent decisions need to be made about what should be done with that money. Projects need to be prioritised; a range of options need to be developed (and costed) so that the Department for Transport can have the choice as to what it wants and, importantly, what delivers the most benefit to customers.
  6. "Funding" should be separated from "Financing": Funding can come from many sources (including the fare payer and tax payer). External financing has to show that it is better for the industry than cheaper finance coming from central or local government and the recovery method needs to be clear from the outset. External financing must also be off balance sheet and reflect a fair risk/reward share to make it viable: it should not simply store up financial problems for the future. There is unlikely to be a "one size fits all" solution – careful consideration will be needed on a project-by-project basis.
  7. Certainty is key to unlocking finance: There is a "wall of finance" available for railway projects from external sources, although the industry must be careful to ensure that its need for finance does not mean that unfair advantages are taken by financiers. Key to unlocking this is knowing: (i) what projects are coming up and when; and (ii) what is the problem that is trying to be solved? We all eagerly awaiting the forthcoming Network Rail pipeline document. There was also feedback that size does not always matter – of course, large projects are attractive to external finance, but small projects can also be made to work if there is an income stream and a suitable (and fair) return on investment.
  8. Increased co-operation and collaboration within the industry is important: The industry needs to lead on the development of the network: this is fundamental to increasing reliability and maximising the use of limited capacity. Joint business plans between train operators and the infrastructure manager can lead to benefits to all – as well as the underlying customer. There will also be a service level agreement between Network Rail and its passenger and freight operating customers which will include detailed and measurable targets that Network Rail will report against. This needs to be matched with a single point of contact and a "can do" attitude, with Network Rail held to account if it does not perform. 
  9. Integration between track and train should not be an end in itself: There is much being said about the benefits of vertical integration, but this should only be brought into effect if there are real benefits of doing so. Operational excellence should be the aim for all parties. Franchise reforms should allow closer working which, in turn, should allow operational performance to improve – but this may not need to be vertical integration in all cases.
  10. Vision for the future: The pace of change in technology is unprecedented. We need to be conscious that today's railway is not the railway of the future or where we need to be. With autonomous vehicles on the very near horizon, the railway has to evolve and consider how it is going to be part of that future. The digital railway is part of this, as well as providing much needed capacity. 
Linkedin

KEY CONTACT

Tammy Samuel

Tammy Samuel
Partner

T:  +44 20 7809 2227 M:  +44 7766 991 053 Email Tammy | Vcard Office:  London

Suzanne Tarplee

Suzanne Tarplee
Partner

T:  + 44 20 7809 2389 M:  +44 7718 247 220 Email Suzanne | Vcard Office:  London

  • Related Sectors
  • Related Locations