Monitoring Network Rail's efficiency

By reporting on Network Rail’s efficiency and wider financial performance over time, we give assurance to rail users and funders that Network Rail is delivering what is expected and at the same time, we provide a strong reputational incentive on Network Rail to become more efficient.

Publications and updates

Annual efficiency and finance assessment of Network Rail

26 July 2019

This document provides our efficiency and finance assessment of Network Rail for 2018-19, the final year of control period 5 (CP5), which ran 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 2013 periodic review (‘PR13’) determination. Our assessments provide a yearly snapshot based on the best available information. It presents financial information on Great Britain, Scotland, and Wales, as well as Network Rail’s routes. It contains information and commentary on Network Rail's expenditure and its efficiency compared to our PR13 determination, its income, financing costs, borrowing, debt, regulatory asset base (RAB) and financial indicators.

The report highlights:

  1. The efficiency of Network Rail’s operations, support, maintenance and renewals (OSMR) activities declined by 7.4% over the whole of CP5 against a PR13 assumption of 19.4% of efficiency improvements.
  2. Network Rail financially underperformed against its internal budget in each year of CP5 and against the PR13 financial assumptions by £10.1bn over the whole of CP5.
  3. There were regional differences in routes’ financial performance.
  4. Significant enhancements have been delivered in CP5 (£19.8bn spent), however for the enhancements it delivered, it overspent by £1.5bn.
  5. Network Rail’s debt increased by £21.1bn to £53.4bn over CP5, largely to pay for enhancements expenditure and also borrowing to cover OSMR underperformance. The inflation element of Network Rail’s debt also increased.

Starting last year, we asked Network Rail to demonstrate that it is better prepared to deliver efficiently from the start of CP6, because poor planning for CP5 caused a number of the problems with its renewals delivery and efficiency in CP5. Routes have not made the progress we expected with leading indicators over the past year and Network Rail has put an action plan in place to address our concerns about efficiency plans and we have seen some progress since then. We have reported on Network Rail’s progress in our recent Network Rail Monitors.

ORR and Network Rail jointly commissioned an Independent Reporter review from Nichols in April 2019, to provide an in-depth independent assessment of Network Rail’s preparations to deliver its renewals and efficiency plans in the early part of CP6. Nicholls will be completing its review in Autumn 2019. Nichols’ interim report is linked here.

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