UK: BR signals profitable routes. (2 of 4)

UK: BR signals profitable routes. (2 of 4) - High interest rates have also badly dented BR's vital property sales. Through the '80s office developments above mainline stations provided a hugh stream of income for the railway. In 1990 the figure was expec

Last Updated: 31 Aug 2010

High interest rates have also badly dented BR's vital property sales. Through the '80s office developments above mainline stations provided a hugh stream of income for the railway. In 1990 the figure was expected to be £370 million. Actual sales will fall some £120 million short of this target because of the sluggish property market. Long term, BR may be able to replace property sales with revenues from its new telecommunications subsidiary in the newly competitive telephone market.

Signs of financial distress were evident in BR's 1989-90 annual results showing that, even after its Government grant had been taken into account, the business managed a loss of some £26.4 million in the year, its first loss for five years.

Extra spending on safety equipment in the aftermath of the Clapham rail disaster, which killed 35 people two years ago, will add to Sir Robert's burden. Although the Government will pay £100 million to help the safety improvements, the devastating criticism of BR's safety standards in a subsequent inquiry hit public confidence in the railway. A string of further train crashes after Clapham did little to improve BR's image either.

Something had to give, and in the autumn it became clear that the ambitious BR £3.7 billion investment plan, covering 1990-93, was an obvious target. Much of this plan was originally to have been financed by increased revenue from passengers and property, so BR has had to cut its cloth accordingly. As Sir Robert acknowledged: "We may have to delay the starting point of some investment until we can afford it." Some 100 late-night and weekend train services were axed by BR's latest timetable as an economy measure. More serious are the delays in introducing some new commuter trains and upgrading the main line to Manchester.

For Chris Green, Network SouthEast director, the current recession could not have come at a worse time. A human dynamo who came from managing BR in Scotland in 1986, Green has given the London commuter railway its own branded identity, initially by painting all of the lamp posts red, much to the then scepticism of the British media. For four years it worked a treat. Passenger numbers soared on the back of an economic upturn, increased leisure time and the growing importance of the City of London after Big Bang in 1986. The number of commuters travelling into London grew by an extra 132,000 between 1985 and 1989, surpassing the all-time high of 1970. On lines north of London ridership rose by up to 60% as soon as new electric trains were introduced.

The extent of the changes can be gauged by the experience of one regular commuter from St Albans. When he started commuting in the days of steam, the journey took an hour. Diesels reduced that to about 40 minutes, but when the so-called BedPan electric trains were introduced, the journey was booked at 17 minutes non-stop. "Though the good drivers can regularly do it in 15," he says.

Green's huge investment programme - "we are currently spending £1 million on investment every working day" - was beginning to pay off, even though long-suffering commuters in Kent would violently disagree with that. Green himself admits that Kent does suffer badly, but points out that the new trains which he has in store for them will turn "the worst suburban railway in Europe into the best".

The recession has made Green "feel schizophrenic. The demand-led growth and new capital investment are the biggest we have seen since the Victorian era. Then slap bang in the middle of that comes this two-year recession." He is confident enough to believe that growth will return once the recession eases, and though the leisure market has been badly hit, his commuter traffic is still holding up well. "We are a gilt-edged business there. People just know that it is pointless trying to bring their cars into central London, so they will always use the train to get to work."

Recession or not, Green is predicting a 20% increase in passengers up to the end of the century. Encouragingly, new investment plans to increase dramatically the capacity of the London railway network with new tunnels - principally the £1.4 billion Crossrail scheme linking Paddington and Liverpool Street stations - have passed muster with the Treasury.

Green now detects a definite change in the political climate in favour of rail. "We have not seen anything like it for 10 years. In fighting for Crossrail we had everyone talking and acting together - the City, politicians, property developers, transport campaigners and civil servants. It is a golden age for trains." It was noticeable that of the 90 motions on transport at the most recent Tory Party conference, most simply called for more investment in rail. Many Conservative councils in the South are addressing the problem practically, by putting money into their local train services or helping with investment as a way of easing intolerable road congestion.

Network SouthEast is still dependent on the taxpayer, albeit only just. Its grant of £143 million this financial year represents only 10% of its income (against 46% in 1984-85). But it is set to break even within three years, becoming the first major commuter railway in Europe to operate without subsidy.

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