Monitoring Network Rail's efficiency

Body
Components

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.

Annual efficiency and finance assessment of Network Rail

28 July 2020

This document provides our efficiency and finance assessment of Network Rail for 2019-20, the first year of control period 6 (CP6), which runs from 1 April 2019 to 31 March 2024.

Our annual assessments are intended to help customers, funders and other interested parties gain a better understanding of Network Rail's efficiency and financial performance compared with the CP6 financial assumptions that we set out in our 2018 periodic review (PR18) final determination.

Our assessment provides a yearly snapshot based on the best available information and presents financial information on Great Britain, England & Wales, and Network Rail’s five regions:

  • Scotland,
  • Southern,
  • Wales & Western,
  • Eastern, and
  • North West & Central.

It contains information and commentary on Network Rail's income and expenditure and its efficiency compared to our PR18 determination.

The report highlights:

  • Network Rail outperformed its planned income and expenditure by £20m in 2019-20, a substantial improvement on recent years’ performance. There were differences in regions’ financial performance.
  • Network Rail has reported £385m of efficiency improvements in 2019-20, £69m ahead of its delivery plan target of £316m for the year.
  • Network Rail spent £1.8bn on enhancements to its network in 2019-20, a significant reduction on 2018-19. Network Rail’s only area of significant financial underperformance in 2019-20 was enhancements, with £86m of overspend (underperformance) for the work that was undertaken.
  • Network Rail underspent against its 2019-20 budget. It has received HM Treasury approval to roll forward £480m of capital expenditure to be used later in CP6 and has submitted a request to HM Treasury to carry forward a further £96m of capital underspends from 2019-20 into later years of CP6. Transport Scotland oversees the flexibility of Scotland grant payments and for 2019-20 it allowed a partial carry forward of grant funding to be spent later in CP6.

There can be no let-up in the focus that Network Rail needs to put on delivering the £3.5bn of efficiency improvements that it has committed to deliver in CP6. However, it has made significant progress addressing concerns raised by us in December 2019.

Covid-19 is having a significant impact on the economy and the railways are no exception. This is a complex issue, which was examined in our recent Network Rail annual assessment. Most of the lockdown measures did not come into effect until March 2020 and, as such, we have found that Covid-19 had little effect on Network Rail’s efficiency and financial performance in 2019-20. We will continue to monitor the impact Covid-19 has on Network Rail in 2020-21.

CP6 publications
Collapse accordion Open accordion

  • Cost Benchmarking of Network Rail - Annual Report: Year 1 of control period 6
    We last published cost benchmarking analysis as part of PR18 and committed to updating this evidence base annually. We also stated our intention to make greater use of comparative regulation in CP6, with cost benchmarking playing an important role. This document is the first annual cost benchmarking report of Network Rail in CP6.
    Published 28 July 2020
  • Preparations to deliver efficiently in Scotland in CP6
    An update on Network Rail's efficient delivery in Scotland in CP6. While progress is being made, we expect an increased focus to meet the target in year 1. More still needs to be done over the coming months in relation to year 2 and later years of the control period.
    Published 19 December 2019
  • Network Rail’s preparations to deliver efficiently in CP6 (GB)
    An update on Network Rail’s efficient delivery in CP6. Overall, it has made a good start, however, we have concerns, particularly about the quality of renewals efficiency plans for later years of the control period.
    Published 19 December 2019
  • Network Rail's preparedness to deliver efficiency in control period 6 (CP6) - Letter to Network Rail. 
    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.
    Published 29 March 2019
  • Network Rail's preparedness for Rail control period 6 (CP6) - Letter to Transport Scotland.  
    This letter responds to Bill Reeve’s letter to us about Network Rail’s preparations to deliver efficiently from the start of CP6.
    Published 29 March 2019

CP6 consultants' reports
Collapse accordion Open accordion

  • Summary Report - Review of Network Rail's renewals and efficiency planning for years 1 and 2 of CP6 - Report from Nichols for the Office of Rail and Road - November 2019
  • Anglia Route Report - Review of Network Rail's renewals and efficiency planning for years 1 and 2 of CP6 - Report from Nichols for the Office of Rail and Road - November 2019
  • LNE and EM Route Report - Review of Network Rail's renewals and efficiency planning for years 1 and 2 of CP6 - Report from Nichols for the Office of Rail and Road - November 2019
  • LNW Route report - Review of Network Rail's renewals and efficiency planning for years 1 and 2 of CP6 - Report from Nichols for the Office of Rail and Road - November 2019
  • South East Route Report - Review of Network Rail's renewals and efficiency planning for years 1 and 2 of CP6 - Report from Nichols for the Office of Rail and Road - November 2019
  • Wales Route Report - Review of Network Rail's renewals and efficiency planning for years 1 and 2 of CP6 - Report from Nichols for the Office of Rail and Road - November 2019
  • Western Route Report - Review of Network Rail's renewals and efficiency planning for years 1 and 2 of CP6 - Report from Nichols for the Office of Rail and Road - November 2019

Underspend and efficiency
Collapse accordion Open accordion

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
Collapse accordion Open accordion

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.