The railway industry in Great Britain

The restructuring of Great Britain's railway industry redefined the roles of industry parties and created a number of new industry participants. HM Government is carrying out a programme for the sale or franchise of most of the businesses which carry on activities formerly carried on by British Rail. The following diagram illustrates certain key relationships between the principal participants in the new industry structure.

Note: The broken line in the diagram above denotes the general ambit of regulation by the Rail Regulator. With limited exceptions, track and Major Station access agreements entered into after 1 April 1994, which include all of those with the TOCs and most of those with freight operators, must be approved by the Rail Regulator.

Railtrack Group PLC is the holding company of the Railtrack Group. its wholly owned subsidiary, Railtrack PLC, is the only owner and operator of a national rail network in Great Britain. It provides access to its network to train operators and co-ordinates train movements on the network. Railtrack has a network licence authorising it to be the operator of the network.

Railtrack's rail network encompasses some 16 000 route kilometres open for traffic (including the associated signalling and control equipment), around 40 000 bridges, viaducts and tunnels and over 9 000 level crossings. The network comprises routes used for main line, suburban, commuter and cross country passenger services and some freight-only routes. More than one third of the network, by track length, is electrified.

Railtrack also owns some 2 500 stations and some 90 light maintenance depots. Almost all of the stations and all of the light maintenance depots are leased to and operated by the passenger train operating companies ("TOCs"). Railtrack operates 14 main line stations ("Major Stations") in respect of which it has been granted a station licence.

Railtrack derives the vast majority of its income from charging TOCs and freight operators for access to its track and Major Stations, from lease rentals for other stations and from lease rentals for light maintenance depots (including rent for plant and machinery). Railtrack receives no direct subsidy from HM Government, but receives some grants in respect of investment in its infrastructure. Railtrack is, however, indirectly dependent on public financial support since its principal customers, the TOCs, receive significant amounts of public financial support by way of subsidy or grant.

There are 25 TOCs which carry on passenger rail services previously provided by British Rail, each of which has been granted a licence to operate trains. TOCs obtain the use of track by means of access agreements with Railtrack (other than on the Isle of Wight, where Island Line Limited leases the railway infrastructure from Railtrack). TOCs also enter into agreements with Railtrack for access to the Major Stations and lease from Railtrack other stations and light maintenance depots which they operate. Access to the stations and light maintenance depots operated by a particular TOC may then be obtained by other TOCs under access agreements with that TOC.

The operations of the TOCs are in the process of being franchised by the Franchising Director, which involves each successful bidder for a franchise being given the right and obligation to operate, normally through a TOC, certain passenger rail services for a specified period under the terms of a franchise agreement. Until franchises are awarded, the TOCs remain in the ownership of British Rail. At 26 April 1996, two of the 25 TOCs, accounting for approximately 13 per cent of Railtrack's aggregate revenue from all TOCs in the year ended 31 March 1995 had been transferred to the private sector. The franchising process in respect of a further five TOCs, accounting for approximately 18 per cent of Railtrack's aggregate revenue for all TOCs for the year ended 31 March 1995, is near to completion. The Franchising Director currently expects to award another six franchises during the summer and early autumn. Invitations to pre-qualify to bid for a further seven franchises were issued on 25 April 1996, and the Franchising Director expects to make a start on franchising the remaining five during the summer. The timing of franchise awards and commencements will depend on the way the market for franchises responds.

Railtrack also provides access to its rail network to European Passenger Services Limited ("EPS") which, in conjunction with the French and Belgian national railways, operates the Eurostar passenger services between London and Paris and Brussels via the Channel Tunnel. EPS is expected to be transferred, shortly, to London & Continental Railways Limited, the successful bidder to construct and operate the Channel Tunnel Rail Link ("CTRL"). At 26 April 1996, this transfer had not occurred, although it may occur before the date of publication of this document. Railtrack also provides access to Rail express systems Limited ("Res") for the purpose of providing charter services and excursions.

Freight operators obtain the use of track by means of access agreements with Railtrack. Freight operators generally have long leases for the occupation and use of freight terminals, sidings, yards, depots and other premises on land owned by Railtrack. Loadhaul Limited, Mainline Freight Limited and Transrail Freight Limited specialise in the carriage of bulk materials including coal, aggregates, steel and petroleum. They also transport track renewal machinery and materials for Railtrack. Freightliner (1995) Limited carries containers between major British ports and inland terminals or customer facilities. Railfreight Distribution operates freight services between regional British terminals (and customer facilities) and the Channel Tunnel. The principal business of Res is the carriage of mail for the Royal Mail. Loadhaul Limited, Mainline Freight Limited, Transrail Freight Limited and Res are owned by North and South Railways Limited. Bids for Freightliner (1995) Limited are currently being evaluated by British Rail with a view to transferring it to the private sector in the coming months. Options for transferring Railfreight Distribution to the private sector are also being examined.

Railtrack is responsible for arranging the maintenance and renewal of the railway infrastructure. This work is contracted out, principally to the seven infrastructure maintenance companies ("IMCs") and six track renewal companies ("TRCs"), which supply services to Railtrack broadly on a geographical basis, but may compete for work from Railtrack in any area. They provide the majority of Railtrack's infrastructure maintenance and track renewal services under contracts generally ranging between five and seven years in duration with effect from 1 April 1994. In addition to their contracts with Railtrack, some of the IMCs and TRCs have contracts with TOCs, freight operators and others for the maintenance of buildings, sidings, plant and machinery. At 26 April 1996, six of the seven IMCs and four of the six TRCs had been sold to the private sector.

Other industry participants include the ROSCOs, which lease passenger rolling stock to the TOCs, and Racal-BRT which provides telecommunications services to Railtrack and others. The ROSCOs, Racal-BRT and a number of other businesses have been sold to the private sector.

The regulatory regime introduced on restructuring of the railway industry included the creation of the offices of the Rail Regulator and the Franchising Director. The Rail Regulator's functions include granting and enforcing operating licences and approving the terms, including price, on which access to track, stations and light maintenance depots is obtained. The Franchising Director, who is required to act in accordance with objectives, instructions and guidance from the Secretary of State, invites tenders for and awards passenger rail franchises and is responsible for making payments by way of public subsidy in respect of certain loss-making passenger rail services.

The following stations are operated by Railtrack:-
Birmingham New Street		London Charing Cross
Edinburgh Waverley		London Euston
Gatwick Airport			Glasgow Central
London Kings Cross		Leeds
London Liverpool Street		London Bridge
Manchester Piccadily		London Paddington
London Victoria			London Waterloo

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Last Updated 09 May 1996


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