Annual Efficiency Assessment of Network Rail

12 September 2013

Network Rail is underperforming on some of its efficiency objectives according to analysis from the Office of Rail Regulation (ORR).

ORR's annual efficiency and finance assessment of Network Rail (2012-13) examines the amount of money the company has spent and what it provided in return for the funds received from train operators and governments. The report scrutinises expenditure on renewals, maintenance and asset management, and what was delivered. It also explains financial adjustments for Network Rail's delivery against its performance targets.

This assessment covers the fourth year of Network Rail's current five-year funding period (CP4), which will end on 31 March 2014.

The analysis shows that Network Rail implemented a number of initiatives – such as rationalising its signalling and control centres and reduced use of sub-contractors – to improve its operating maintenance and renewals expenditure. It also highlights that Network Rail is on track to deliver its rail enhancement programme, bringing great benefits to passengers. Over the past year, the company has completed extensions to the East London line, electrified the Paisley Canal branch line and lengthened platforms to increase capacity on the East Coast main line.

However, the report highlights that efficiency improvements slowed in 2012/13. ORR's assessment is that Network Rail is unlikely to deliver the potential 23.5% efficiencies identified for operations, renewals, maintenance and asset management by the end of CP4.

ORR Chief Executive Richard Price said:

Network Rail has been entrusted with large amounts of public and passengers' money, which, if invested well, should deliver the levels of efficiency and punctuality it promised to deliver. However, the company is falling short of expectations at the moment. It is facing many problems of its own making, having failed to deliver plans to renew Britain's rail network, with delayed works now affecting performance. The company must urgently catch-up and address the problems which are causing disruption to passengers and target its work as efficiently as possible. This is vital as it heads towards its new five-year delivery plan with more stretching targets.

ORR's analysis identifies some key issues which have led to the company not meeting its efficiency targets:

  • Lack of knowledge of assets and lack of delivery of its civil renewals programme. The reliability of information Network Rail holds on the condition of its tracks, bridges and other assets is not as good as it should be. ORR has seen some improvement, but there remains a good deal of work ahead for the company to be as efficient as it can be. ORR's assessment also highlights issues associated with Network Rail's deferral of its work to renew Britain's rail network, with lower-than-planned renewals affecting performance levels.
  • Poor maintenance planning leading to poor asset performance and delays. Too much of the maintenance work being carried out by Network Rail is reactive rather than preventative. There is also an increasing backlog of maintenance work. Network Rail acknowledges that some maintenance depots are under-resourced and it will increase the amount of planned maintenance work this year.
  • Inadequate attention to drainage in particular hampering preparation for adverse weather. Last year's wet autumn and winter weather exposed the impact of under-investment in earthworks, such as drainage and embankments. There were 125 earthwork failures in 2012-13, compared to 12 in 2011-12. Network Rail is re-assessing its monitoring regimes so that it can target its work more effectively.

ORR today also published the latest analysis on rail performance. The Network Rail Monitor, which assesses rail performance between 1 April 2013 – 20 July 2013, shows that the company remains short of key targets. For example, punctuality on London & the South East services is 91.1%, around 1.9 percentage points below the funded target; and punctuality for long distance passenger services is 87.1%, 4.9 percentage points below target. ORR's assessment of financial performance is less than that reported by Network Rail taking account of the company's failure to deliver required levels of train punctuality and reliability.

Network Rail is unlikely to meet a number of targets in its current funding period, and it will have significant ground to cover in the next funding period (2014-19). The regulator will be more demanding of Network Rail's performance to ensure improvements are delivered for its customers.

Notes to editors

  1. ORR is the independent safety and economic regulator for Great Britain's railways. Follow ORR on Twitter @railregulation
  2. Read ORR's Efficiency and finance report.
  3. Read ORR's latest analysis of Network Rail's performance.
  4. Under an order made by ORR, if Network Rail fails to deliver its 2013-14 punctuality target for long distances services (92% PPM) it faces a substantial financial penalty. The size of any financial penalty will reflect the extent of Network Rail's failure to meet the commitment, increasing by £1.5 million per 0.1 percentage point it drops below the target. Network Rail is failing to deliver on its own performance recovery plan for the long distance services, and needs to do much more if it is to deliver its commitments.
  5. In June 2013, ORR published for consultation plans for Britain's railways between 2014 and 2019. ORR is now reviewing responses to the consultation, and will publish its final determination on 31 October 2013.