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UK's Network Rail Reassesses 5yr Spending Plan - Good News for HS2?

Just when everything appears to be settled, along comes a bump in the track and everything goes off course.

It seems that Network Rail’s ambitious programme for the next five years is coming off the rails. Even before the Summer Budget, they had announced pauses to their electrification programmes on two lines: including the TransPenine line.

In the Summer Budget, George Osborne announced a journey change for the funding of the rail refurbishment plans. The government will now direct budgets via train operating companies rather than directly to Network Rail, so the latter must meet the demands of the train companies and their passengers.

Plans for refurbishing the tracks have been slowed down. The programme will not run on time; a situation some will say is something the UK has learnt to live with over many years of an ancient railway system.

From the Summer Budget

The £38.5bn investment programme was going to solve it. But now it seems likely that the government will cut some of the funding.

For the UK infrastructure industry and the contractors this is a very unwelcome blow. This is especially true after a transparent initial start when upcoming workloads were more visible and contractors had already been awarded projects.

To address the problems, the government has asked Sir Peter Hendy, Chairman of Network Rail and HS1’s Chief Executive Nicola Shaw to put their heads together to assess the problems and come up with a plan by this autumn (2015).

This report has been instigated because Network Rail have failed to meet 30 of 84 project ‘milestones’ in the five-year plan so far. It was also revealed that its overhead line renewals were also not keeping pace; 77% of this work is behind. In monetary terms this means Network Rail incurred fines of £53m last year due to missed targets.

The Enormity of the Project

Our railway system carries about 4 million people every day – that’s double the volume of 20 years ago. Network Rail has 20,000 miles of track, most of it dating back to Victorian times, and running through 18 major stations. The works that are being carried out also mean that in the hugely busy London stations at least one in every ten trains doesn’t run on time.

The upkeep over the years has been very poor. This isn’t all down to Network Rail of course. The railway consisted of a number of individual regional railways until nationalisation in 1948. It was in 1993 that the railways were privatised again and when tracks and train companies were independent of one another. Railtrack was Network Rail’s forerunner.

Generally it is considered that there has been insufficient investment by successive governments and the Network Rail programme is intended to ensure the safety of the tracks and to update and electrify lines where necessary.

Delayed Projects

It does look as though there will be delays although until the report by Hendy and Shaw is in the hands of the government, it is all speculation.

What we know is that there are already delays in the electrification programme. Some of the big name contractors will be watching to see what happens with great interest as they are already committed to the programme. These companies include Carillion, Babcock Rail, Bam Nuttall and Costain.

Mark Carne, Chief Executive of Network Rail insists that the company will still ‘remain one of the industry’s biggest clients.’

The Consensus of Opinion

Still, the general feeling is that projects will be delayed and that the set programme for this first five years will inevitably run over into the next five. Prioritisation is likely to be enforced and this could mean changes for contractors already teed up for work with Network Rail.

However these delays could mean that HS2 gets in on the act providing it meets full governmental approval. The industry suggests that as Network Rail‘s refurbishments slow down, so HS2’s first phase from London to Birmingham will bring work into the industry. No matter that the necessary skills will be somewhat different i.e. laying new track rather than making an ancient track worthy of the 21st century.

UK Construction Could Benefit

One of the plans from the government is to sell off and develop land owned by Network Rail that could be used for commercial construction. These actions could make up some of the shortfalls for the infrastructure improvements and as a bonus keep the UK construction industry going forward.

This suggestion comes as a result of the success of developments at Kings Cross and Stratford stations. But nothing is written in stone yet.

A Watchful Eye

In the meantime, you can be sure that we will continue to watch and report the outcome of this area of the UK’s infrastructure industry.

So if you are looking for positions in UK infrastructure then check out our listings and please send us your CV via this website.

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Steve Thomas
Director
Maxim Recruitment

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