Efficiency and finance assessment of Network Rail

This document provides our Efficiency and finance assessment of Network Rail for 2015-16 pdf icon PDF, 2,048 Kb, the second year of control period 5 (CP5), which runs from 1 April 2014 to 31 March 2019.

Our annual assessments are intended to help customers, funders and other interested parties gain a better understanding of Network Rail's financial performance compared with the CP5 financial assumptions that we set out in our PR13 determination. Our assessments provide a snapshot based on the best available information at a point in time.

This 2016 publication covers the second year of CP5, 1 April 2015 to 31 March 2016. It presents financial information on Great Britain, Scotland, and for the first time, Wales, as well as the ten Network Rail operating routes set out in our determination. It contains information and commentary on Network Rail's expenditure and its efficiency compared to our PR13 determination, its income, borrowing, debt, regulatory asset base (RAB), financing costs and financial indicators.

We also assess the value of Network Rail's RAB because it reflects the extent to which Network Rail has spent money to renew or improve its network, as well as other adjustments in accordance with our PR13 determination.

The report pdf icon PDF, 2,048 Kb highlights:

  1. Network Rail’s expenditure in 2015-16 was £287m higher than our PR13 determination and £479m higher than in 2014-15.
  2. The backlog of work is increasing. Work to the value of £953m (compared to our PR13 determination) was delayed from 2015-16 to a later date including £579m on renewals work, £340m on enhancements work and £34m on associated schedule 4 compensation payments for track possessions
  3. In Great Britain, for the control period to date Network Rail reported a decline in efficiency on its core business (i.e. excluding enhancements) of -8.0%, compared to our PR13 determination assumption of a 10.1% efficiency improvement. In other words, costs have risen but we expected them to fall.
  4. The financial underperformance of the whole business, was £679m for 2015-16. This is largely due to renewals and the operation of Network Rail’s business costing more than expected. In Scotland, financial underperformance was £51m.
  5. We have expanded the section on routes this year to include comparisons by route both to our PR13 determination and to income and expenditure in 2014-15.

We also monitor Network Rail's operational performance, including in respect of safety risk, train performance, asset performance, asset sustainability and planning. These assessments were included in our Health and Safety Report 2016 and our Network Rail Monitor Q3-4 2015-16 publications. Monitoring operational performance is important in helping us to verify that Network Rail has delivered its obligations in return for the money it has received from train operators and the governments, and that it only retains the benefit of the savings that it has genuinely achieved, which is the focus of this document.

The information contained within this document has been compiled from Network Rail's 2015-16 regulatory and statutory financial statements, our PR13 determination, Network Rail's CP5 Delivery Plans and updates to those plans, and the conclusions of independent reporters and other sources as specified.

On 31 March 2017 we published an addendum to our annual efficiency and finance and finance assessment of Network Rail 2015-16, which sets out the Route-level efficiency benefit sharing payments (REBS) 2015-16 pdf icon PDF, 689 Kb.

Previous assessments

Underspend and efficiency

It is important for the viability and development of the railway that Network Rail delivers its outputs at the least possible cost in order to minimise the financial burden on both its customers and funders.

In order to facilitate this, in 2006 we published our policy on monitoring underspend and efficiency.

Further information