News from BWCS

First Group Lives up to its Name and Signs Two New Rail Contracts – Only a Day After Dramatic Shake-Up of UK Rail Announced

Fri 21 May 2021

No sooner was the ink dry on yesterday’s UK rail White Paper, than First Group had signed two of the new National Rail Contracts. While most in the industry were still digesting the implications of the long-awaited, now slightly renamed, Williams-Shapps review, First was putting pen to paper on new deals to continue running South Western Railway and the Transpennine Express.

Importantly, the agreements seem to secure First’s plans to roll out 5G passenger WiFi along the main lines served by South Western Railways. In addition, it will deliver a new fleet of Suburban trains from Alstom. As the contract-holder at TransPennine Express, First, says it will finish rolling out the Nova fleet of trains and continue investment in stations, with the development of the net-zero carbon roadmap.

The new National Rail Contracts, which will see the government retain all revenue risk, fully replace the former system of franchises. In reality, the system had been virtually ended by Covid-19 pandemic.

First Group will be paid a fixed fee of £3.3 million per annum for running South Western Railway. However, there are considerable performance related incentives to run punctual and clean trains. Providing the customers are happy, the rewards could push First’s fees up to £9.9 million a year. It is not clear if this includes providing a WiFi service to passengers that they do complain about.

For the Transpennine Express contract the fees are slightly reduced - a fixed fee of £2.3 million rising to a maximum of up to £5.2 million.

It remains to be seen how effective the new contracts will be in restoring confidence in a rail network which has been hammered by the pandemic and was not short of critics before lockdown. As part of the reforms, ministers have set up a new controlling body, Great British Railways, to bring together the infrastructure and operation of the network.

Meanwhile, First Group’s West Coast Partnership Emergency Recovery Measures Agreement (ERMA) remains in place for a further 10 months. Discussions are said to be under way to replace this with a new National Rail Contract, which would run for ten years. The ERMA that Great Western is operating under has also been extended until next month, but the direct award for Great Western Railway does not expire until the end of March 2023.

There is no doubt that for the government and indeed all stakeholders in the new report – the aim is not shrink the railways in the UK, nor to hinder progress and investment, but, as Grant Shapps, the Minister for Transport put it, to “Make the railways more efficient.” He hopes to introduce “Simpler structures and clear leadership” which will “make decision-making easier and more transparent, reduce costs and make it cheaper to invest in modern ways to pay, upgrade the network and deliver new lines.”

The report outlines 10 key outcomes that it hopes the changes will deliver:

a modern passenger experience

a retail revolution

new ways of working with the private sector

economic recovery and financial sustainable railways

greater control for local people and places

cleaner, greener railways

bold, new opportunities for rail freight

increased speed of delivery and efficient enhancements

skilled, innovative workforce

a simpler industry structure

It remains to be seen how many of these goals the dramatic shake-up will actually achieve.