The Office of Road and Rail found that Network Rail had spent £353m more than expected on renewing the rail network, with £953m of renewal and enhancement works scheduled for 2016 now pushed back “to a later date”.
This will place pressure on Network Rail’s future borrowing facility with Department for Transport, putting the rail operator in a “worse financial position” at the start of Control Period 6 than first expected, the ORR said.
The findings were part of the ORR’s annual efficiency and finance assessment of Network Rail.
The assessment compares Network Rail’s current performance against the ORR’s 2013 periodic review, which assessed what Network Rail must achieve between 2014 to 2019 (see table).
Its next periodic review is in 2018, which will assess the rail operator’s targets during 2019 to 2024.
Renewal expenditure for 2015/16 was £353m higher than the 2013 expectation, while £579m of renewals, £340m of enhancement works and £40m of additional work scheduled for 2016 have been pushed back “to a later date”.
This was attributed to supply chain issues, delays in programmes, contractor performance, severe weather and work taking longer than expected.
The overall £2.9bn spent on enhancements in 2015/16 was £161m less than expected in the PR13 report, however this was largely down to £340m of this work being deferred to a later date.
The total cost of work delivered in Control Period 5 is £1.7bn higher than PR13 estimates.
The news follows Network Rail’s annual report in July which saw debts of £41bn in what chief executive Mark Carne called “a tough year” for the organisation.
The annual report followed a series of pauses and overspends on Network Rail’s £38.5bn enhancement programme.
| 2015-16 prices | Actual | Allocated CP4 rollover |
Adjusted actuals |
Periodic Review 2013 |
Over-spend before adjusting for deferrals |
Deferral / (acceleration) of work |
Gross financial out / (underperformance) |
|---|---|---|---|---|---|---|---|
| A | B | C = A+B | D | E = D-C | F | G = E-F | |
| Track | £984m | – | £984m | £710m | -£274m | £42m | -£316m |
| Signaling | £647m | – | £647m | £792m | £145m | £425m | -£280m |
| Civils | £622m | – | £622m | £476m | -£146m | £70m | -£216m |
| Buildings | £221m | £10m | £231m | £188m | -£43m | £13m | -£56m |
|
Electrical power and
fixed plant
|
£144m | £43m | £187m | £224m | £37m | £85m | -£48m |
|
Telecoms
|
£53m | £13m | £66m | £96m | £30m | £38m | -£8m |
|
Wheeled plant and
machinery
|
£90m | – | £90m | 118m | £28m | £28m | 0 |
|
Information
technology
|
£127m | – | £127m | £86m | -£41m | -£41m | 0 |
| Property | £15m | – | £15m | £30m | £15m | £15m | 0 |
| Other renewals | £174m | -£66m | £108m | £4m | -£104m | -£96m | -£8m |
|
Total renewals
expenditure
|
£3.07bn | 0 | £3.07bn | £2.72bn | -£353m | £579m | -£932m |
A Network Rail spokesperson said: “The funding settlement for Control Period 5 was extremely challenging from the outset, requiring Network Rail to deliver more for less on an increasingly congested network.
“A corporate transformation plan is in place which will enable us to make improvements across our business.
“But the backdrop is that demand for services on the network are growing significantly and the result has been an ever greater squeeze on the amount of time we have available to carry out scheduled maintenance, renewals and enhancements.
“This means we have not met our efficiency targets, but it has enabled us to cater for a record 1.7bn passenger journeys over the course of the year.
“We continually strive to maximise our efficiency and deliver genuine value to taxpayers as we upgrade the rail network.
“At the same time, we recognise that we need to improve further in managing the cost of our major schemes and drive further efficiency in our work to maintain and renew the network.”
