Back to Investment overviewThe rail network is a critical part of the UK’s transport infrastructure, supporting passenger mobility, freight movement and wider economic activity. The network in Great Britain comprises of more than 20,000 miles of track, thousands of stations and associated infrastructure such as signalling, telecoms and power systems. Millions of passenger journeys are made on the network each day, alongside significant volumes of rail freight.
The core rail infrastructure in Great Britain is owned and managed by Network Rail, a publicly owned company responsible for maintaining, renewing and enhancing the network. Network Rail is the infrastructure manager, while passenger services are operated by a range of train operating companies and freight services by private freight operators.
Rail policy and strategic direction are set by the UK Government through the Department for Transport, alongside Transport for Wales and Transport Scotland. The economic and safety regulation of the railway is undertaken by the Office of Rail and Road (ORR), which monitors Network Rail’s performance and efficiency and ensures it delivers value for passengers, freight customers and taxpayers.
Over £36bn is spent each year in rail, across both operations (£26bn) and enhancements (£10bn), with major infrastructure managers like Network Rail, London Saint Pancras High-Speed, Core Valley Lines in Wales and Eurotunnel investing significantly through their supply chains. For example, Network Rail spends around 75% of its total funding envelope with their supply chain, contracting directly with over 4,000 suppliers, 70% of which are SMEs.
In the case of third-party investment in rail, a large part of this comes from passenger and freight operators. For these operators, access to rail infrastructure, stations, depots and facilities is vital for them to be able to invest in their rolling stock and other passenger and freight services more generally. One of ORR’s roles is approving access to infrastructure manager assets (like Network Rail’s track and stations) and resolving access requests to other facilities as depots (as in the recent case of the Temple Mills International depot).
For third-party investment in rail infrastructure, these can be made via the Network Code governing changes to Network Rail’s infrastructure – and which is also overseen by ORR as the regulator.
The rail industry is currently undergoing structural reform. As part of these reforms, the Government is working to establish Great British Railways (GBR) as a new integrated body responsible for the strategic planning and management of rail infrastructure and services across Great Britain.
Following the restructuring of the railway industry in the 1990s, the roles of infrastructure management, train operations and economic regulation were separated. Infrastructure management responsibilities were consolidated within Network Rail, with regulatory oversight provided by the ORR.
ORR’s role includes:
- monitoring Network Rail’s performance and efficiency;
- ensuring that infrastructure managers meet their obligations to passengers and freight users;
- overseeing access arrangements for train operators; and
- promoting competition and value for money in the rail sector.
As rail reform progresses and the transition to Great British Railways takes place, regulatory roles and responsibilities may evolve. The ORR is expected to continue to play a key role as the independent advisor to the Secretary of State with regard to third party and private investment into the rail network.
The Rail Network Investment Framework (RNIF) has been developed by the ORR to support transparent, efficient and well-governed third-party and private investment in the rail network. The framework aims to ensure that infrastructure investment is planned and delivered in a way that provides value for money and aligns with the needs of passengers, operators and investors.
The RNIF sets out a structured approach to the development and oversight of private and third-party funded rail investment schemes. It provides guidance on how projects progress through stages of development, the governance arrangements that apply at each stage and how risk is apportioned between different parties.
First published in 2006, the ORR is currently undertaking a review of the effectiveness of the RNIF. This is at the request of the Chancellor and is to support Government’s Growth Agenda. This review is examining how well the framework supports investment in the rail network and whether there are barriers that may limit the development or delivery of major infrastructure projects. The review aims to identify opportunities to improve transparency, support economic growth and enhance support for investors. It will also act to strengthen governance and ensure the framework supports efficient and timely investment.
The review is ongoing, and the ORR has published information about the work programme on its website, alongside updated guidance and supporting materials intended to help investors and other stakeholders better understand the rail investment framework and the processes associated with major infrastructure projects.
ORR provides sources of information and guidance relevant to analysts and investors:
- An information page about the Rail Network Investment Framework (RNIF), setting out the process for investment, what different parties to an investment are obliged to do and an outline of the template agreements available to investors. This also includes links to the consolidated guidelines and the latest on the ‘deep dive’ review of the RNIF.
- A guide for investors considering opportunities across different asset areas of the UK rail network, providing a high-level illustrative overview of how investments in depots, stations, signalling, power infrastructure and place-based projects around stations could be undertaken under the Rail Network Investment Framework.
- An illustrative guide of the investment pathway in the UK rail sector, setting out the typical steps an investor may take from concept to deliver, as well as the role of Network Rail, ORR and other industry stakeholders.
