Passenger Rail Franchising – British Experience
PASSENGER RAIL FRANCHISING – BRITISH EXPERIENCE Chris Nash Andrew Smith (ITS, University of Leeds)* ABSTRACT Given that virtually all British passenger train services were franchised out over the period 1995-7, and many have now been franchised for a second time, Britain should provide an excellent opportunity to study the impact of franchising passenger rail services. Moreover, since several different franchising models have been tried, there should also be some useful evidence on how best to go about franchising. In practice, however, the turbulent history of the British rail industry over this period makes drawing firm conclusions difficult. At the start, it appeared that franchising was very successful with strong competition for franchises, rapidly rising traffic, rising productivity and falling subsidies. Whilst most of the increase in traffic was due to external factors, the growth appears somewhat faster than would be explained by these factors alone. Despite this, a number of train operating companies got into financial difficulties, particularly in the Regional sector, where franchisees were relying on reduced costs rather than increased revenues to achieve subsidy reductions, and in the short term franchises were renegotiated or replaced with cost-plus contracts pending refranchising. After the bankruptcy of Railtrack not only have the costs and performance of the infrastructure manager severely deteriorated, but there has also been a large rise in the costs of train operating companies. Without a better understanding of the causes of this rise it is hard to form firm conclusions on the success of franchising. One argument is that one of the reasons franchisees found it difficult to achieve the anticipated cost reductions was the degree to which costs had already been driven down in the 1980s.
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