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Network Rail faces £3bn budget shortfall

Network Rail is being encouraged to make broader use of modular technology to help it achieve 21 per cent savings on its spending in the next five years.

The Office of Rail Regulation made the suggestion as it determined that the rail operator must get by on £26.5 billion for 2009-14 compared to the £29.5 billion it asked for.

Its report said: “For platform extension works we believe that an average cost reduction of 12.5 per cent is achievable, taking into account the large scale of the programme and the significant scope for modularisation.”

More than 500 platform extensions are planned for England and Wales over the next five years.

Corus Rail will start work later this month on a steel modular platform extension at Mill Hill Broadway in north London as part of the Thameslink programme.

But these are steel modular builds and the ORR would like to see a study into lightweight modular platforms made of polystyrene, which are already used extensively in Holland.

A Network Rail spokeswoman said: “We are always looking at new technologies, there is never a one-size-fits-all approach.”

But the rail operator will continue to push its case for an extra £3 billion of funding.

Chief executive of Network Rail Iain Coucher said: “On the face of it, the proposed funding settlement is insufficient.

“I am extremely concerned that the funding settlement outlined will put our plans to meet rising demand at risk.”

Last week Network Rail announced it had made an after-tax profit of £1.2 billion last year, up £2 million from 2006/07.

But the net debt for the company, which has no shareholders, rose to £19.7 billion for the year ending March 2008 from £18.4 billion.

Spending money

BASELINE PROJECTS(2006/07 PRICES)
Access for All£206 million
King’s Cross redevelopment£175 million
West Coast: Stafford/Colwich remodelling£483 million
West Coast: Bletchley/Milton Keynes£114 million
West Coast power supply upgrade£272 million
Total England & Wales baseline projects£1,25 billion
SPECIFIED PROJECTS
Thameslink programme£2,7 billion
Intercity express programme£260 million
Network Rail discretionary fund£234 million
National stations improvements programme£156 million
Strategic freight network£208 million
Reading station area development£456 million
Birmingham New Street£128 million

Analysis: It’s hard to see how belt-tightening can save £3bn

By Rosemary Beales

The Office of Rail Regulation draft determination will have raised a few eyebrows.

A 21 per cent reduction in the Network Rail budget between 2009 and 2014 is a big ask, even of an organisation that is focusing on becoming a world class client.

Without cutting projects, delivering the same amount of work with over one-fifth of the finance missing would require eye-wateringly tight belts at Network Rail.

Targeting of contractors, who currently face seven to eight per cent inflation, is not going to help them.

Suppliers are leading in efficiency gains. Network Rail is aware its procurement process takes too many resources and is engaging with the supply chain to improve this.

Better planning, particularly in the design and tender processes and early contractor involvement, would help – but change does not happen overnight.

The ORR claim that 21 per cent efficiencies can be found in the Network Rail budget over five years – and clearly these must be delivered, but not at the expense of losing projects necessary for a world class rail network.

Rosemary Beales is a director at CECA National

Click on the resource box on the right hand side of the page to download the full ORR report