Rail industry is still fragile despite booming numbers

Despite delays, weekend closures and overcrowding, Britons love affair with the railways seems to grow stronger every year. Passenger numbers have risen by 50 per cent since the mid 1990s and, so far,  the rate of increase shows no sign of abating.

The reasons for the boom are fairly straightforward. Railways have always done well at times of economic growth and the big driver is commuting as passengers with season tickets now account for half of all journeys. In particular, the economy of London and the South East, where rail has a captive market, is rising at a far faster rate than the rest of the country, .

Moreover, while trains are often heaving with people and late, the alternatives, such as congested motorways or domestic flights made nightmarish by rigid security and crowded skies, are worse. Surveys show that most rail travellers are generally satisfied with their journey, thanks to an influx of new rolling stock in the last decade and a gradual improvement in punctuality since the low point of the Hatfield train in 2000 when the system nearly came to a halt as a result of Railtrack’s incompetence.

Oddly, though, despite the recovery, this is not the story of a booming industry happy with itself and confident of its future.  First, the railways are absorbing far more subsidy than ever before in the history of the railways, some £5bn per year, and the government is eager to reduce this figure by forcing up fares and extracting large premium payments from the train operators. Operators are already feeling the squeeze and one, GNER, has already been forced to hand in its franchise because its forecasts proved over optimistic.

Secondly, any downturn in the economy would have an immediate impact on the railways, with reductions first in discretionary leisure travel and then commuting. This has not happened since the railways were privatised and would put unprecedented pressure on the industry and government. With several recently signed franchise contracts having been based on significant continued growth, a recession would pose problems both for the operators, who would lose money, and the government, which could find its franchising policy in tatters if too many operators sought to throw in the towel.

In fact, the government faces problems on the railways either way. If a recession is avoided and passenger numbers continue to grow at the present rate, the long term plan for the railways published last year made clear that ministers are not prepared to invest the substantial sums needed to ease capacity constraints. If the government’s tactic of trying to damp down demand through above inflation fares increases fails (an old BR trick adopted by Labour), then pressure will build from passengers for the major increase in investment that is needed to relieve congestion. The railways may be on a high today, but, as the engineering overruns at Christmas and Easter caused by Network Rail showed, public confidence in the system can easily be lost.

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