On 19 May 2023, Network Rail published its Strategic Business Plan (SBP) for England and Wales for the period from 1 April 2024 to 31 March 2029, known as Control Period 7 (CP7). The publication of the SBP is the next step in the Periodic Review process led by the Office of Rail and Road (ORR) which establishes Network Rail's funding and outputs for CP7.

The SBP responds to the objectives set by the Secretary of State for Transport in December 2022 in the High Level Output Specification (HLOS) within the funding envelope specified in the Statement of Funds Available (SoFA) of circa. £44bn. The Government's objectives include: meeting customer needs; delivering financial sustainability; contributing to long term economic growth; improving levelling up and connectivity; and delivering environmental sustainability.

The SBP focuses on the operation, maintenance and renewal of the railway in England and Wales in CP7. It does not cover infrastructure enhancement projects which are dealt with separately (for example, the £96bn Integrated Rail Plan announced in November 2021 - see our previous post for further details). A separate business plan will be published by Network Rail soon in relation to infrastructure in Scotland.

Context: challenges and changes

  • Rail reform: This is a period of change for the rail industry as the Government seeks to implement reform in line with the Williams-Shapps Plan for Rail by establishing Great British Railways (GBR) which will own the railway infrastructure and let and manage most passenger rail contracts. The SBP sets out Network Rail's expectation that it will transition into GBR during CP7 and GBR will inherit the funding and output obligations determined as part of this Periodic Review.
  • Financial context: It is acknowledged that the current economic environment is challenging - the sector is still recovering from the impact of the pandemic, there is significant inflation risk and the network comprises ageing infrastructure with a growing number of assets reaching 'end of life'. Further, in the HLOS, the Secretary of State highlighted the importance of Network Rail supporting the financial sustainability of the railway by delivering greater cost efficiencies.
  • Climate change and extreme weather: More frequent extreme weather events have been experienced across the network. Investment is needed to ensure that railway infrastructure is as resilient as possible to significant rainfall, high winds, erosion and rising sea levels in order to support a safe railway.

Key points in the SBP

  • Meeting customer needs:
    • Safety: Network Rail will prioritise the ongoing safe operation of the network in CP7. Plans include:
      • ensuring that Network Rail's policies and governance support a strong safety culture;
      • improving passenger safety by reducing the risk of accidents (in particular, continuing the work of the Weather Risk Task force and ongoing Carmont Action Plan, improving the resilience of the network to extreme weather and climate change, enhancing boundary fencing to reduce trespass and animal incursions and improving personal safety and security at stations);
      • improving public safety by targeting level crossing closures and improvements, working to reduce suicide risk and helping to educate the public on the risks associated with the railway; and
      • ensuring the safety and well-being of Network Rail's workforce by (amongst other things) using technology to reduce the amount of time staff are on the network (e.g. using remote condition monitoring, drone technology) and updating its workforce health and wellbeing strategy.
    • Train Service Delivery: The SBP acknowledges that current train performance is not as good as it should be. In CP7 Network Rail's objectives are to give passengers the highest levels of train performance possible, to improve planning of train services and maintenance access to minimise disruption and minimise asset service affecting failures. However, Network Rail's analysis shows that providing a reliable and punctual train service is likely to get more difficult in CP7 as there are more challenges and uncertainty and Network Rail is expecting a decrease in asset reliability. To mitigate the impact of this, Network Rail has identified a number of initiatives and plans to work closely with train operators.
    • Freight: Network Rail is developing, in collaboration with GBRTT and the freight sector, a 30 year freight strategy which has informed its plans for CP7. Its plans support a freight growth target of 7.5% and include investing in the network to facilitate longer and heavier freight services, rolling out the European Train Control System (ETCS) freight cab fitment and protecting freight train service performance.
    • Customers and communities: The SBP includes initiatives to ensure the railway is accessible and inclusive - for example, the renewal of lifts and escalators and the installation of tactile edges on platforms.
  • Delivering financial sustainability:
    • Efficiency targets: Network Rail has set efficiency targets of 15% for capital expenditure and 10% for operating expenditure in CP7, which amount to £3.4bn. 
    • Approach to asset investment: To achieve the HLOS objectives within the funding available, Network Rail has prioritised investment on areas of the network which generate higher revenue, whilst seeking to provide an appropriate level of service to areas where revenue is typically lower. This is a more market-led and whole industry approach to planning than the traditional asset condition focussed approach that has been historically adopted. 
    • Long term impact: The SBP notes that the level of renewals activity in CP7 will have cost implications in the future, with increased renewals funding being required in CP8 and CP9.
  • Contributing to long term economic growth and levelling up:
    • People strategy: Network Rail will focus on transformation to become a high performing service-led organisation with an engaged and skilled workforce.
    • Use of technology: Network Rail intends to invest £148m in research, development and innovation and £811m in progressing ETCS.
    • Working with the supply chain: Network Rail will also work closely with its supply chain to increase visibility of its pipeline of work, enabling suppliers to invest in staff and training.
  • Delivering environmental sustainability and climate change adaptation:
    • Investment: Network Rail will invest approximately £1.6bn on weather resilience and sustainability initiatives in CP7.
    • Environmental sustainability: In line with its Environmental Sustainability Strategy, Network Rail will seek to reduce carbon emissions (primarily by transitioning its road fleet to EVs), improve air quality, ensure non-traction electricity comes from renewable sources, improve biodiversity and minimise waste etc. 
    • Weather resilience and climate change adaptation: Network Rail will identify risks and develop strategies and investment plans to minimise the impact of climate change. This includes improving Network Rail's internal capability and operational processes via dedicated earthworks and drainage teams, operational weather expertise, climate change adaptation strategy investment and continued investment in the Weather Risk Task Force.

What happens next?

The ORR will now review the SBP and issue its draft determination, followed by its final determination (expected in June and October 2023 respectively). Following the issue of the final determination, the implementation phase will commence with Network Rail producing its delivery plan for CP7.

If you have any queries in relation to the Periodic Review, please do not hesitate to get in touch with a member of our Rail Team.