GB rail industry financial information 2014-15

GB rail industry financial information for 2014-15 presents ORR’s analysis of the latest financial data from train operators, Network Rail and governments.

Key findings include:

In 2014-15, the rail industry had income of £13.5 billion. Most of this was from passengers (71%), with governments providing 26% of funding. Other sources of income, such as property, provided 3%. After adjusting for payments within the industry, the overall cost of running Great Britain’s railways was £13.6 billion, with 54% of these costs incurred on train operations and 46% on rail infrastructure.
Industry income from passenger fares has increased by £0.4 billion (5%), to £8.8 billion. This is primarily because the number of passenger journeys increased by 4% and partly because of fare increases of 1% in real terms. Most of the increase in journeys has been in London and the South East. Of the total fare income, 62% was from unregulated fares and 38% from regulated fares.
Governments’ funding of the rail industry as a whole has reduced by 9%, from £3.9 billion to £3.5 billion. This includes funding from all government sources, including devolved administrations and passenger transport executives. After adjusting for the finance costs paid by Network Rail to the Department for Transport, government funding to the rail industry has reduced by 14%, to £3.1 billion.
At an aggregate level, franchised train operators contributed significantly more to government than in previous years. Based on the methodology used for our analysis, this is the first year that payments to governments exceeded net support funding from governments. Whereas in 2013-14 franchises received net support of £0.1 billion, in 2014-15 they made net payments of £0.7 billion to governments. This was largely due to a change from governments supporting train operators to increased support for Network Rail. There was wide variation in net support or net premium between franchised operators. Open access operators and freight operators received no direct support.
Rail infrastructure net funding from governments increased by 12% from £3.7 billion to £4.2 billion. Following the PR13 determination, Network Rail’s income from train operator charges reduced by £0.8 billion while its net funding from governments has increased by £0.5 billion.
Industry costs increased by £0.9 billion (7%), largely due to an increase in Network Rail’s maintenance and renewals costs, as well as an increase in train operator costs.
Total government funding varied from £1.66 per passenger journey in England to £6.70 per journey in Scotland and £9.14 per journey in Wales. The level of funding provided by government varied from 21% of total industry income in England to 56% in Scotland and 54% in Wales. The rail industry has high fixed costs, so these differences in funding are partly due to the very different average passenger densities, with 129 passengers per train in England, 81 in Scotland and 69 in Wales.

Further information

Money flows in the rail industry

Money flows in the rail industry 2014-15

Numbers may not sum due to rounding. Parentheses indicate negative numbers.
Total industry expenditure excludes the two payment flows shown between train operators and Network Rail because these flows are not external to the industry. Total industry expenditure is £7.4 billion + £6.2 billion = £13.6 billion.
TfL is Transport for London; PTEs are Passenger Transport Executives.
DfT grant to operators is £0.5 billion, with a further £0.2billion of negative profit share, which rounds to £0.6 billion.
DfT income from operators is from franchise premiums (£2.0 billion).
DfT income from Network Rail (FIM fee and interest on government loans) is not subtracted from the £4.2 billion of support.
Network Rail’s government financing costs are made up of £0.4 billion for the financial indemnity mechanism fee on older debt (before Network Rail’s reclassification to the public sector in 2014-15) and £0.1 billion in interest costs on loans from DfT.
Only the cost of borrowing is included, rather than the cash amount of borrowing used to fund some expenditure.
Network Rail’s amortisation (depreciation) charge is based on the long-run annual average renewals investment expenditure that is required to maintain the network in a steady state, as adjusted for financial sustainability.
Track access and other charges of £1.4 billion do not include traction electricity. Traction electricity costs used by train operators (£0.2 billion) are included in train operators’ other costs and not in Network Rail’s costs.
Franchised train operator dividends of £0.2 billion are not included in their costs or industry expenditure.