Rail funding down by 4.8% as Network Rail grants cut

Passenger support up by 3% as bills rise in Scotland, Wales and London

Government support for the rail industry at current prices fell by 4.8% during 2024/25 and dropped below £12 billion, according to recent ORR figures.  The spending was split between Network Rail, (£7,607 million, down 8.7%) and the passenger train operators, who received (£4,183m, 3% up). Another £27.5m was spent on freight grants, a 33% cash increase.

The £11,857 million total was 4.8% lower than in 2023/24, but 3.9 times higher than the figure in the last pre-Covid year of 2018/19. Then, support for passenger services was just £526m, so it has risen almost eightfold. Previously, for eight years between 2010 and 2018, the passenger train operators were net contributors to government through the payment of premia – which reached a total of £817m in 2015/16.

The 2024/25 figures show that, overall, DfT support for operators in England was virtually unchanged, but the bills for the devolved governments were on the rise, the largest growth of 14.8% being seen in Wales. There, the total bill rose to £431m when support for the Core Valley Lines is added, up from £170m in 2018/19. London saw an increase of 19% to £322m, whilst Scotland saw a 2.6% increase to £824m.

The figures also show capital spending of £9,546m, the bulk of which (£7,111m) went on HS2, with another £126m on the East-West Rail project and £225m on the Core Valley Lines in South Wales. Spending on enhancements for the rest of the rail network totalled £2,084m, 4.8% up on the year but down by a third compared with the figure for 2018/19.

Government Support for the Rail Industry

(£m, current prices)

The figures give a high-level breakdown of operating costs on the passenger business, enabling us to look at both their movement and the percentage breakdown.

The largest component was staff costs, which, at £4.45 billion, represented 28.2% of the total. This was 8.6% up on 2023/24 and 8.8% higher than in 2018/19. Other statistics from ORR show that rhe total workforce increased by 4.6% to 65,822 during the year, more than eight per cent higher than before the pandemic. Largest growth was seen at TfW, where the workforce has increased by 54% since 2018/19, closely followed by TransPennine Express on 48.3%. At the other end of the scale, several operators have reduced their headcount since 2019, including East Anglia (10.6%), Avanti West Coast (7.5%) and Merseyrail (1.5%).

As a result, labour cost per employee averaged £67,614 across the network, 4.6% up on the previous year and 8.1% higher than in 2018/19. After adjustment for inflation, though, the annual increase was limited to 1.4%, and the change since before Covid is actually a fall of 1.6%. There are wide variations across the TOCs, going from over £90,000 in the two London concessions to under £60,000 in three operations away from the South East. Any move to harmonise conditions and remuneration under GBR could prove to be a very expensive business.

Track access charges paid to Network Rail totalled £4.29 billion, accounting for 27.2% of the total. The figure was 7.7% up on the year, and 24.6% higher than pre-Covid. Adjusted for inflation, the increase since 2018/19 is 19.3%.

Rolling stock charges were the third highest component, on 26.1%, giving a total figure of £4.12 billion. This represented an increase of 23.8% over the previous year and 35.4% over 2018/19 (32.3% real). For the first time, ORR gives a breakdown of this spending, into leasing charges (£2.73 billion, 17.3% of total costs), maintenance charges (£1.45 billion, 9.2%) and other (a credit of £61m). However, no comparative data is supplied.

Diesel fuel is the smallest component identified separately, accounting for 2.2% of total costs.  The £344m total was 4.6% down on the previous year, and 1.4% down on 2018/19’s figure. The remaining 16.2% was absorbed by other operating costs. The total, at £255m, was 7.5% up on the previous year, but 19.9% below 2018/19 (21% in real terms).