Investing in the rail network: The investment framework

What is the investment framework?

 The investment framework is a set of policies and guidelines describing how railway investments should be treated. It primarily covers:

• the process for investment
• what the different parties to an investment are obliged to do
• an outline of the template agreements available to investors

September 2022 update

Increasing the volume and broadening the source of third-party investment in the network is a key priority for Network Rail continuing into CP7.

In September 2022 we published an updated version of the investment framework to ensure that it reflects current investment practices. Key amendments include:

• removal of references relating to borrowing against the Regulatory Asset Base - an option no longer available since Network Rail was reclassified as a public sector organisation
• removal of references regarding Network Rail transacting using hypothecated gains as a consideration – again, no longer an option since Network Rail’s reclassification
• further detail on the template contractual agreements, which are used by the majority of investors
• additional information on the Industry Risk Fee and Network Rail Risk Fee funds and how these are governed
• updated and additional links to related content and guidance

We will keep the investment framework under review and intend to deliver further updates in the short term.

This may result in more substantive changes to the policy following the introduction of Great British Railways.

We will also look to review key aspects of policy, including the rebate mechanism.

How is investment funded?

In England and Wales, investment to enhance the rail network is funded primarily through Government’s Rail Network Enhancements Pipeline (RNEP), with some major schemes such as High Speed 2 being funded via bespoke arrangements. This has created a rolling programme of investment that focuses on outcomes that deliver benefits for passengers, freight users and the economy.

This has moved government investment in rail enhancements away from the five-year funding cycle (that is, aligned to price control periods) that was previously in place.

In Scotland, the pipeline of enhancement projects and associated funding is managed through the Team Scotland Execution Plan (TSEP).

This sets out defined roles, responsibilities and lines of accountability relating to the ownership of programmes, projects and cost estimates to ensure that they are delivered as effectively and efficiently as possible.

Stakeholders may want to invest in the rail network outside of these processes, whereby stakeholders wish to address an opportunity not necessarily identified or prioritised by governments.

Investors may include (but are not limited to):

• train operators
• ports
• freight operators
• local authorities
• financial investors
• consortiums of such parties

Stakeholders may require a way of funding investment in the rail network outside of government processes. It is for these investments that we have developed our investment framework.