How Has the Change in the Industry Model Affected the GB Rail Sector?

How Has the Change in the Industry Model Affected the GB Rail Sector?


Remi Martins-Tonks, Oxera Consulting LLP, Joseph Duffy, Oxera Consulting LLP, Andrew Meaney, Oxera Consulting LLP


The industry model introduced in the mid-1990s led to several changes that were unlikely to have occurred under the government-owned body that previously managed GB railways. This paper quantifies the impact of the change in the industry model.


Passenger rail journeys have more than doubled in Great Britain since the mid-1990s, from 0.7bn journeys in 1994/95 to 1.6bn journeys in 2013/14 (Office of Rail Regulation). This is partly due to a number of factors such as growth in employment and population, which are not influenced by train operators or other stakeholders within the industry. However, it can also be attributed to changes in the industry model.

This paper, which is based on work commissioned by the Rail Delivery Group, examines and quantifies the benefits of the change in the rail industry model in Great Britain that occurred in the mid-1990s. At this point the industry model changed to one in which the government specifies the passenger services to be delivered, and the train operating companies (TOCs) provide these services.

We will first examine the specific changes that occurred due to the change in industry model. These include access to larger volumes of private sector capital; five-year funding period periods for the infrastructure manager (Network Rail), which allowed continued government support to the industry; a change in the incentives to TOCs to grow the market; and the availability of heavily discounted advance fares. The paper will illustrate how the above factors have helped to lead to increased passenger growth.

Following this, we will quantify the benefits arising from the change in the industry model. This will involve identifying an appropriate counterfactual, which will based on a transparent set of assumptions around what would have happened in the absence of the change. These assumptions will generate a range of effects that cannot be attributed to the nature of the industry model, and thus suggests what effects the change itself might have had. We will then estimate the extent to which the increased passenger growth observed since the mid-1990s is attributable to the change in industry model. This will be done by calculating the percentage of passenger growth that can be explained by factors outside the control of the rail sector (using standard industry approaches), and attributing a proportion of the remainder of the passenger growth to the change.

The final step will be to calculate the associated user benefits and wider economic benefits (e.g. reduced congestion on the road network) that relate to the higher rail passenger numbers, and thus highlight the benefits that have occurred due to the change.

We believe that this paper provides an interesting example of quantifying the impact of one of the most far-reaching transport policies in Great Britain over the last two decades.


Association for European Transport