Network Rail is less efficient than comparable European railway operators, the rail regulator said last week.
3.6% efficiency improvement
The Office of Rail Regulation (ORR) said that in the last year Network Rail made a 3.6% efficiency improvement in its operating, maintenance and renewals work.
But, in international efficiency benchmarking data, Network Rail is between 34% and 40% less efficient than European rail operators. This is a similar gap to that found when the ORR reviewed Network Rail’s performance in 2008.
Inefficient processes for awarding contracts to renew railway track are among the reasons for the efficiency gap, said the regulator.
Network Rail must become 21% more efficient by the end of the current five-year regulatory period in March 2014, according to targets set by the ORR.
“Given the current economic climate, it is absolutely critical that the rail industry makes every penny count”
“Given the current economic climate, it is absolutely critical that the rail industry makes every penny count,” said ORR chief executive Bill Emery.
“The company still has much to do in the remaining years of the control period to meet our expectations.”
Network Rail blamed years of underinvestment in the railway network for its performance to date.
“The legacy of years of under-investment meant we have started this race from well behind our European counterparts but we are fast catching up,” said a Network Rail spokesman.
University of Southampton head of civil engineering John Preston, who has studied the economics of the British rail industry, said that the efficiency targets were tough but achievable.
Network Rail made 27% savings in the last regulatory period, missing its target of 31%.
“Network Rail failed to meet its efficiency target in control period 3 and found efficiency gains particularly difficult to achieve towards the end of the period as the gains become more difficult to identify.
“Furthermore, efficiency gaps between the UK and continental Europe exist in a number of sectors, suggesting the problem is more widespread than just rail.
“I would expect that Network Rail will find the 21% target tough, but that might also indicate that ORR has got it about right,” he said.
The ORR report will be submitted to Sir Roy McNulty’s government-commissioned rail value for money study, which is looking at ways to reduce costs across the entire rail sector.
Initial findings from his review will be outlined in the government’s forthcoming Comprehensive Spending Review, with the final recommendations expected in March 2011.
The ORR’s 2009-10 efficiency and financial report also shows that Network Rail received £5.8bn in income.
This was mainly from track access charges paid by train operators and from a network grant paid by the government.
The track operator also spent £6.5bn operating and improving the network.