Rail Regulator finds Network Rail’s delivery plans are broadly on track but raises risk funding concerns

The regulator has noted that risk funding arrangements are working well and are providing planning stability to Network Rail in challenging circumstances. But, in the two years since the start of CP6, remaining risk funding has reduced considerably from £2.7bn as shown in its 2019 Business Plan to £0.8bn, in part due to the impact of COVID-19.

This situation is creating some challenges across Network Rail, particularly in Scotland, where it only has £57m available to fund £106m of identified risks. Network Rail Scotland is currently considering changes to its plans to fund this potential gap.

While Network Rail remains broadly on track to renew the railway, some of this work – such as signalling and telecommunications – has been put back towards the end of CP6. ORR has emphasised the need for Network Rail to effectively manage deliverability risks.

Overall, the regulator considers that Network Rail’s plans represent good progress towards meeting its challenge to deliver £3.5bn of efficiency improvements over the five years and where improvements are needed in Scotland, that it is taking on board ORR’s feedback to improve.

ORR also highlights the importance of Network Rail being transparent about changes to its five-year plans and their effects on safety, asset sustainability, performance, and income/expenditure.

John Larkinson, ORR’s chief executive, said:

“Network Rail has continued to deliver well in extremely challenging and changing circumstances. Work to renew the railway is broadly on track and Network Rail has listened to us and delivered its early efficiency commitments.

“The risk funding arrangements have worked well in challenging circumstances, but we are concerned that there has been a significant decrease in the remaining risk funding, which is particularly acute in Scotland. Network Rail must now set out how it will manage this position more clearly, particularly given future uncertainty.

“We will continue to monitor and engage with Network Rail as it tackles these issues to help ensure the continued safe and reliable running of Britain’s railway.”