Network Rail Faces Funding Pressure as Renewal Costs Rise

Network Rail Faces Funding Pressure as Renewal Costs Rise

Network Rail has come under funding pressure as renewal costs have continued to rise significantly.

The Office of Road and Rail (ORR) had found that Network Rail spent over £353 million more than anticipated on the renewal of the rail network, with £953 million worth of enhancement and renewal works that were scheduled for this year now pushed back to an unknown later date.

The ORR said that put extra pressure on the borrowing facility of Network Rail with the Department for Transport, while placing the rail operator in a worse than expected financial position at the beginning of Control Period 6. The findings came as part of the ORR’s yearly efficiency and finance assessment of Network Rail.

In this assessment, the ORR compares Network Rail’s current performance with their 2013 periodic view, which re-evaluated what Network Rail should achieve in the period from 2014 to 2019.

The body’s next periodic review is due to take place in 2018 where the rail operator’s targets from 2019-2024 will be assessed.

In 2015/16, renewal expenditure was £353 million higher than the expectation outlined in 2013, with £340m of enhancement works and £40m of additional work scheduled for 2016 have been pushed back to a later date.

The reason for this was put down to issues with supply chain, programme delays, the performance of contractors, severe weather conditions and some of the work taking longer than expected to complete.

However, the total £2.9 billion spent on enhancements in 2015/16 was £161 million less than the PR13 report predicted, although this was primarily down to £340 million worth of the work being deferred to a later date.

The overall cost of the work delivered in Control Period 5 is £1.7 billion more than the amount estimated by PR13, while the news follows the annual report from Network Rail in July which saw £41 billion of debts in a difficult year for the group.

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