2 minute read
Executive Summary
Enhancing the UK rail network brings significant benefits for communities, the economy, and the environment. For every £1 spent in rail, £2.50 of income is generated in the wider economy. However, as the gap between investment requirements and available public funding grows, there is now an opportunity to consider a greater strategic role for private investment. This has been deployed successfully in the UK rolling stock market, and there are specific examples of successful private investments to build on, such as in rail freight. There is untapped potential to expand its use to unlock investment in future rail infrastructure schemes.
In particular, private finance or funding could potentially be used to:
Advertisement
● Grow rail freight through investment in terminals, depots, and new freight interchanges;
● Invest in connecting communities and services via rail stations and new rail links;
● Support transport decarbonisation, such as through faster rail electrification;
● Roll out digital signalling; and
● Exploit synergies between rail and other infrastructure assets, such as renewable energy and telecoms.
However, to progress these opportunities, there are a number of challenges that policy makers would need to address. Currently, schemes are held up by a complex and opaque system, which lacks the transparency and certainty that the private sector needs to invest and innovate. RIA’s four key asks of the UK Government are therefore:
Ask 1: A clear Government policy on rail and private investment
Ask 2: More pathfinder projects and standardised approaches
Ask 3: Intelligent market engagement and a targeted review of procurement practices
Ask 4: Fair comparison of the costs and benefits of private finance with public borrowing
Introduction
This paper sets out the case for private investment in UK rail infrastructure, and identifies four key challenges which we believe need to be addressed.
Rail has the potential to be the backbone of a lowcarbon, high-growth economy. But as the gap between public funding and the investment required grows, we will need to consider private investment as a means to invest upfront in the UK rail network. Around the world, private investment is regularly deployed to support transformative infrastructure projects. This includes several sectors including renewable energy and water, as well as transport.
Private finance has successfully been used in the UK rolling stock market, securing over £4.5bn of investment over 2016-20221 and significant parts of today’s freight network have been privately developed. In contrast, there is very little private finance or funding in other parts of the railway, despite repeated government policy commitments to increase this.
Private investment could bring forward much needed schemes in diverse areas spanning new stations, electrification, digital signalling, new rail links, freight depots, renewable energy, and other innovative technologies.
A successful railway needs to look at the whole life cost of its decisions. In particular, private investment can complement public funding by creating a smoother profile of earlier investment, such as in the resilience and energy efficiency of the network, meaning benefits will be realised sooner but also that costs can be more efficiently managed over the long term.
The first section of this paper considers the case for increasing private investment in rail. Part two outlines key challenges, and the third section sets out what is needed for a new approach. Finally, part four considers some specific opportunities for private investment in rail.
Definitions
‘Funding’ is who ultimately pays for an investment – the revenues from taxpayers, rail users or the proceeds from commercial activity in and around the railway.
‘Finance’ spreads the need for funding over time, and involves investing money that must be reimbursed, at a return, to the lender (e.g. like a mortgage).
In this paper, we use ‘private investment ’ to mean both private finance and private funding. Although the paper primarily considers the case for private finance, there may also be opportunities for privately funded schemes, where the revenues can be directly recovered by the private sector (such as through land value capture or retail).