Network Rail Limited Annual report and accounts 2019 NetworkNetwork Rail Limited’sLimited’s Annual Report andand AccountsAccounts 20192016 PrePresentedsented to Parliament by Theby The Secretary Secretary of Stateof State for forTransport Transport by Command of Her Majesty by Command of Her Majesty 18 July 2019 CmCP 119 9297 © Crown copyright 2019 This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/ version/3 Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned. This publication is available on our website at www.gov.uk/government/official-documents Any enquiries regarding this publication should be sent to us at [email protected] ISBN 978-1-5286-1365-1 CCS0519271032 07/19 Printed on paper containing 75% recycled fibre content minimum Printed in the UK by the APS Group on behalf of the Controller of Her Majesty’s Stationery Office Our year in numbers In this report we outline performance during 2018/2019, the fifth and final year of Control Period 5. Here is a snapshot of how we performed against a selection of key indicators. * Before depreciation and amortisation. Revenue in the year Passenger km travelled (bn) £6,676m 68km (2017/2018: £6,580m) (2017/2018: 67km) Operating costs* Passenger trains on time £3,577m 86.3% (2017/2018: £3,192m) (2017/2018: 87.8%) Loss before tax Freight trains on time £173m 94.0% Freight Delivery Metric (2017/2018: £48m profit) (2017/2018: 93.5%) Net debt Freight moved £54.1bn 17.4bn (2017/2018: £51.3bn) (2017/2018: 16.9bn net tonne km) Number of workforce safety Capital expenditure close calls made against our target of 205,000 £7,043m 256,250 (2017/2018: £6,634m) (2017/2018: 259,009) A higher number represents a better performance. Putting passengers first We are constantly looking for ways to make passenger journeys as easy and comfortable as possible. Here are some of the changes we have made in the last few years in our managed stations to do just that. We have introduced hundreds of new seats. Toilets at our managed stations are now free to use. We have installed water fountains at 19 of our managed stations, giving passengers free access to water and reducing the need for bottled water. We are constantly improving our mobility assistance services. We have installed lifts and ramps, improved parking spaces and made toilets accessible. Contents Strategic report Corporate governance 01 Introduction by our chair 81 Our board of directors 03 Message from our chief executive 85 Corporate governance report 05 About us 94 Safety, health and environment committee report 12 Chief financial officer’s review 97 Audit and risk committee report 18 How we performed in 2018/19 106 Treasury committee report 21 Route performance 108 Nomination and remuneration committee report 23 Anglia 110 Directors’ remuneration report 27 London North Eastern and East Midlands 124 Directors’ report 31 London North Western 35 Scotland 39 South East Financial statements 43 Wales 127 Independent auditor’s report to the member of 47 Wessex Network Rail Limited 51 Western 136 Income statement 55 Freight and National Passenger Operators 137 Statement of comprehensive income 59 Property 138 Statement of changes in equity 61 Group Digital Railway 139 Balance sheets 62 Putting people first 140 Statement of cash flows 65 Being responsible 141 Notes to the financial statements 68 Our approach to risk management 78 Viability statement For further information visit networkrail.co.uk Strategic report Network Rail Limited Annual Report and Accounts 2019 Introduction by our chair, Sir Peter Hendy CBE Our railway is crucial for Britain’s economic prosperity. Rail connectivity creates economic growth, jobs and housing. That is why it is so important that the railway runs smoothly, providing a reliable service, and that we keep investing in rail as wisely and efficiently as possible, to maximise connectivity and boost economic growth. Over the last five years we have delivered huge investment accountability across the industry, some of which we into the network to do just that. We have completed ourselves are responsible for. The weeks that followed were world-class projects, including some landmark engineering a humbling reminder of the huge role that rail plays in feats and complex programmes to create new capacity and people’s lives and how profoundly they are affected when major upgrades at a number of our managed stations. the industry does not work well enough together. We are very sorry for the disruption that passengers suffered and, But despite these successes, Control Period 5 was an in CP6, we will put that right by doing whatever is needed, extremely challenging period for Network Rail. We entered working more closely with operators and putting the into it having committed to deliver more projects than ever interests of passengers and freight users at the heart of before, with many at such an early stage of development what we do. that we needed to design and deliver them simultaneously. And, following our reclassification, we did this under public Throughout this period, our focus on safety has been ownership and in a very different financial environment. unwavering. We have worked hard to improve safety and The full significance of those changes took time to be we now have the safest major railway in Europe, with fully understood and that contributed to the financial record low levels of train accident risk. Compared to Control and delivery crisis we found ourselves in part way Period 4, the number of fatalities at level crossings has through the control period. dropped by 14 per cent, and there have been no passenger fatalities in a train accident since 2007. Real progress has been made, but we can and we must do more. Sadly, on Our commitment to face this challenge head-on and lead 3 July 2019, two of our colleagues in South Wales tragically our own recovery has seen us mature significantly as a lost their lives while working on the railway. Their loss is felt business and we are stronger today as a result. We have deeply by all of us and is a painful reminder of why we developed world-class engineering expertise, delivered must work as hard as we can to get everyone home safe greater infrastructure reliability than ever, introduced every day. new rigour into project planning, carried out a large-scale divestment that enabled significant investment and re- Nobody has been more committed to driving forward focused the organisation on our core business. safety on the railway than Mark Carne CBE, who departed as our chief executive in August 2018. This year also saw But, as our project delivery grew sharper, the day-to-day the departure of Michael O’Higgins as non-executive performance of the railway was declining. The May 2018 director. I would like to thank both of them for their timetable difficulties highlighted this imbalance, and contribution to Britain’s railway. In particular, I’d like to revealed significant issues with planning and thank Mark for the pivotal role he played, not only in 01 Network Rail Limited Annual Report and Accounts 2019 Strategic report Chair’s introduction continued instilling a relentless focus on safety, but on improving Finally, we welcome the Government’s Rail Review. project delivery, furthering devolution, improving equality This gives a unique opportunity to reshape our industry and and diversity, and preparing the organisation for Control align our targets so that we can deliver a better service to Period 6. passengers and freight users in years to come. We have welcomed the opportunity to work with Keith Williams and I’d like to welcome Mike Putnam and David Noyes, who his team, and we will fully support the implementation of were appointed to the Board in 2018, and Andrew Haines its recommendations when they are announced later in OBE who joined us as chief executive. Our commitment to 2019. If the whole rail industry does the same then I am passengers and providing great service is embodied in confident we can deliver a better service for passengers Andrew. He is passionate about putting passengers and and freight users and a railway that will continue to freight first, and I know that he will bring this passenger- support and drive sustainable economic growth. focused mindset to every level of the business. So far, he has already brought a renewed focus on whole-railway performance, devolved more responsibility to those running the railway day-to-day and initiated and led much greater collaboration within the industry. Sir Peter Hendy CBE, 15 July 2019 chair 02 Strategic report Network Rail Limited Annual Report and Accounts 2019 A message from our chief executive, Andrew Haines OBE The economy of the UK is changing the way that people are living and working. More and more people are using rail as the means of travelling between towns and cities, the economic powerhouses of the country. In the last two decades rail has time and time again system and not understood the magnitude of operational demonstrated that it’s the fastest, most efficient and change needed to realise the passenger benefits of big sustainable way to make city-city journeys and passenger infrastructure upgrades. We let passengers down, and this numbers have doubled. was a painful wake-up call. Rail freight is playing an important role in a sustainable I took this job because I’m determined to put passengers economy. The modern rail freight industry does so much and freight users first.