Britain’s rail operators face severe budget cuts next year

Rail companies are drawing up plans for double-digit budget cuts next year, raising the prospect of fewer trains on Britain’s rail network as the industry struggles with a drop in revenue since the coronavirus pandemic.

The Department of Transportation, which controls the railroad’s finances, has told train operators to reduce spending, according to three people familiar with the matter.

Budget cuts of more than 10 percent were discussed, although the exact amount could vary from company to company and some operators may not face such large reductions, two of the people said.

Train company executives said fewer train services were an inevitable consequence of the budgets being drawn up.

“These are very, very demanding cost reductions that we fear will have an impact on the railway and on the passenger experience,” said another.

Train operators are preparing their budgets for the financial year starting in April 2023 under instruction from the DfT, which took over all cost and revenue risk from the industry when Covid led to an almost immediate collapse in passenger numbers in March 2020.

The renewed pressure on the industry’s finances comes as passenger numbers and ticket revenue struggle to recover from the impact of the pandemic in parallel with a collapse in the number of premium-paying commuters.

Total passenger revenue was £2.2bn in the three months between July and September, the latest quarter for which data is available, according to the Office of Rail and Road, the industry regulator. This is 71 per cent of £3.1 billion in the same period in 2019, adjusted for inflation.

The industry earned £164m from season tickets during the period, just 29.4 per cent of the £556m earned three years earlier. There was also a sharp drop in the number of peak tickets sold, as more people timed their commutes to avoid the most expensive trains.

Ministers have long said the industry must reform to save money and adapt to changing travel patterns, after spending billions to keep trains running during the pandemic.

But Louise Haigh, shadow transport secretary, said the government needed to “get clear” on its plans and “stop dodging accountability” for the problems on the railways.

“Rail passengers across the country have been forced to rely on a failing service thanks to years of broken Tory promises on infrastructure and an indefensible refusal to hold failing private operators to account,” she said.

“The veil of secrecy over steep cuts to already shockingly poor services is deeply troubling.”

The railway’s battered economy has also contributed to the most significant industrial unrest in a generation, as unions stage waves of strike action in disputes over pay rises and changes to working practices.

With budgets so tight, the government has said major pay rises must be linked to modernisation, sparking a clash with the RMT union.

The Department for Transport said: “Due to commercial confidentiality, we cannot comment on ongoing budget discussions. We continue to ensure that all rail operators provide services that better meet demand following the pandemic, in the most cost-effective way.”

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