UK rail operators face steep budget cuts next year

Railway 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 grapples with a decline in revenue since the coronavirus pandemic.

The Department for Transport, which controls the railway’s finances, has told train operators they will need to reduce spending, according to three people familiar with the matter.

Budget cuts of more than 10 per cent were being discussed, although the exact amount may differ from company to company and some operators may not face such steep reductions, two people said.

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

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

Train operators are preparing their budgets for the financial year beginning in April 2023 under instruction from the DfT, which assumed all cost and revenue risk from the industry when Covid led to a near instant 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 high-fare paying commuters.

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

The industry made £164mn from season tickets over the period, just 29.4 per cent of the £556mn earned three years before. There was also a sharp fall 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, having spent billions keeping trains running during the pandemic.

But Louise Haigh, shadow transport secretary, said the government needed to “come clean” 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 Tory broken 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 shattered finances have 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 tied 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 all rail operators deliver services that better meet post pandemic demand, in the most cost effective way.”