The cost of foreign ownership

Class 142
Published Tue, 2015-09-01 11:49

With the new leader of the Labour Party, Jeremy Corbyn, now openly advocating the renationalisation of the railway industry, the reality that Britain’s railways are already nationalised — but by foreign government owned bodies — is shown by figures produced by Aslef.


Northern Rail Class 142 No 142054 at Blackburn on 3 July 2015. Northern Rail is one of the TOCs partly owned by the Dutch company Abellio. © Peter Waller

Recorded in the 2014 Rail Franchise Handbook and thus showing the last reported figures for 2012 generally, the report shows how many franchises are controlled in whole or in part by the state-owned railways of France, Germany and The Netherlands.

The state-owned operator with the largest interest in UK railway passenger franchises is the German-owned Deutsche Bahn (DB). DB’s interest in the UK passenger industry grew significantly through its acquisition of Arriva in 2010. Courtesy of this purchase, not only did DB buy one of the UK’s most important bus operators, but it also acquired a number of rail franchises: Arriva Trains Wales and CrossCountry as well as a 50% share in London Overground. According to the Aslef figures, these operations made profits of £13.6 million, £13 million and £6.5m million respectively (the Overground profit is split with the franchise’s other 50% shareholder — the Hong Kong based MTR). Prior to the Arriva take-over DB also controlled Chiltern Railways although this company had made a loss of £4.7 million in the year ending 2012 (this was still a considerable improvement, however, on the £46.6 million loss the previous year). Moreover, apart from the franchised operations, DB also control two open-access operators: Grand Central, which operates services on the East Coast main line, and Great North Western, which has recently been given the go-ahead to run services on the West Coast main line to Blackpool.

Nederlandse Spoorwegen (NS) operate in the UK under the Abellio name. NS has operated Merseyrail (profit £11.8 million) and Northern Rail (profit £33 million) jointly with the British-based Serco. More recently Abellio has won the franchise for Greater Anglia (profit £3.6 million) and, from the spring of 215, also took on the ScotRail franchise previously held by First Group (profit, for First Group, in 2012 of £17.2 million). As with DB, Abellio also has a number of bus interests in the UK as well.

Keolis is controlled by the French-owned SNCF. The company has a 35% stake in Govia (with Go-Ahead Group owning the other 65%). Govia controls the London Midland (profit £81,000), Southern (£13.4 million), South Eastern (£16.2 million) and Thameslink (profit for First Capital Connect in 2012 was £4.9 million). In addition, Keolis also has a 45% stake in First Transpennine Express (profit in 2012 £50.1 million) and, since December 2014, has held the franchise for the Docklands Light Railway. Finally, is also part of the consortium that operates the Nottingham Express Transit system.

Of course, it’s not only the passenger franchises of the National Network that are foreign owned. DB Schenker, the country’s largest provider of railway freight services, is also owned by DB. DB also holds the franchise for the operation of the Tyne & Wear Metro. The second largest freight operator in Britain is Freightliner; this too is foreign owned, although by the US based Genesee & Wyoming Railroad rather than by a company controlled by a foreign nationalised industry. GB Railfreight is controlled by the largely French-owned Eurotunnel.

Whilst the bulk of the country’s infrastructure — with the exception of High Speed 1 (which is owned by two Canadian pension funds) — is owned by Network Rail for the present (although there are plans to hive off certain sections, such as the telecommunications business), all three of the ROSCOs — Angel, Eversholt and Porterbrook — are now under foreign ownership. Although controlled for a period by British-based banks, the banking crisis and the need to dispose of non-core assets has seen all three sold to foreign-controlled consortia.

What does the above tell is about the possibility of railway privatisation? Whilst it’s demonstrable that a majority of the British public are in favour of a return of the railways to public control, the sheer complexity of recreating British Rail Mark II makes it unlikely to be feasible in the short to medium term. Clearly, passenger operations could be returned to the public sector if franchisee fails, as has happened in the past with the East Coast main line franchisee, or at the end of the franchise period. However, the increasing length offered to new franchisees means that any such reversal policy would take years and certainly stretch beyond the life of a single five-year parliament. The only other option would be to compensate the existing holders and, in an era when public expenditure is severely constrained, would this be an acceptable use of public funds when the NHS and education need ever increasing funds?

It seems likely, therefore, that whilst there would be public support for Corbyn’s plans, practicalities dictate that the hotch-potch privatisation of the railway will continue. The industry will be largely nationalised — just not by the British government — and profits will continue to flow abroad to support the railway industry of France, Germany and The Netherlands.