Network Rail does better while doing worse

More profitable, less punctual - just what we all want from the company that maintains our railway tracks...

by James Taylor
Last Updated: 19 Aug 2013

If, like MT, you've spent much of this morning marooned on a railway platform, you'll no doubt be delighted to learn that Network Rail has just reported an 11% jump in profits for the year to March – while at the same time admitting that train punctuality actually fell, from 91.5% to 90.9%. However, this was partly due to the rotten weather before Christmas, which was hardly NR's fault. It's clearly doing a lot of the right things – and at a time when more of us are using the train than we have been for decades, perhaps it's no wonder that our ageing infrastructure is creaking under the strain.

Network Rail said today that its full-year pre-tax profits climbed to £438m. Revenues were up slightly, from £5.66bn to £5.71bn, but the main reason for the improvement to the bottom line was a £400m reduction in costs. A recent report by Sir Roy McNulty suggested that the cost of running the UK train network needed to come down by about 30% (to bring us into line with our chums on the continent), and Network Rail seems to have accepted this in principle – or at least, it has been forced to do so by the rail regulator. Inevitably, the result of this cost-cutting drive was the loss of around 1,500 jobs.

But it's also clear that some of Network Rail's problems – and thus its costs – are management-related. And we're not just talking about the shenanigans surrounding outgoing HR director Peter Bennett (who was seemingly allowed to get away with some fairly dubious behaviour for years). Chairman Rick Haythornthwaite has openly criticised the 'militaristic' top-down management style under the previous regime; and Network Rail suggested today that it's trying to devolve decision-making down through the company as part of its cost-cutting efforts.

Of course, that won't solve what many people think is the fundamental reason for inefficiencies: the fact that the tracks are maintained by one (quasi-public) company and the trains run by various other (private) companies. When asked by the BBC whether the structure contributed to the industry's higher relative cost, Network Rail FD Patrick Butcher said 'I think that the industry can improve by working closer together'. Which we think means: kinda.

Still, the other point to remember is that Network Rail is technically a not-for-profit. So any extra money it makes by reducing costs should be ploughed back into track maintenance - thus, hopefully, improving its punctuality figures in the long term. Well, that's the theory, anyway...

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