'Significant risks' in current rail franchising system

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Britain's rail franchising system is increasingly vulnerable to an economic slowdown, a report has warned.

A relatively small number of bidders face growing risks when competing for franchises, according to the study commissioned by new transport think tank Tracks.

Train companies are relying on significant rises in revenue and could be left in serious financial difficulty if there is a long-term fall in demand for rail travel, the analysis by Credo Business Consulting stated.

The report called for a more flexible franchise model which allows ticketing policies to adapt to flexible working practices, industry-wide schemes to boost capacity and more focus on the "long-term development of customer loyalty" rather than short-term profits.

Most of Britain's passenger rail services are provided by franchised train operating companies.

Firms submit bids to the Department for Transport (DfT) and contracts are awarded to provide specified services for a fixed number of years.

Tracks has been established by sustainable transport charity the Campaign for Better Transport.

Author of the report, Matt Lovering, said: "The success of franchising has been one of the key factors in the dramatic increase in rail usage over the last 20 years.

"But this growth has significantly increased the social and economic importance of the railway, making it essential that the network continues to evolve and offer attractive services to all customers.

"The current franchising model has significant risks and limitations which may hinder this process.

"We hope that the model will evolve in a way which builds on the successes of the last 20 years but creates more flexibility to meet the needs of different customer segments and responds to the economic, social and technology changes which are anticipated in the years ahead."

The DfT controls 15 franchises in England and Wales.

Some firms are given government funding to run trains, while others pay a premium.

Around three pence in every pound spent on fares goes towards company profits.

Renationalising the railway when each contract expires is one of the key policies of Labour leader Jeremy Corbyn.

The network was privatised by Sir John Major's Conservative government in 1993.

Union leaders have condemned the fact that large parts of Britain's rail network is owned by German, Dutch, French, Belgian and Italian state-owned railways.

They claim profits from fares are subsidising operations abroad, with around 70% of rail routes wholly or partly owned by foreign states.

The Rail Delivery Group (RDG), representing train companies, says passengers and the Treasury benefit by rail companies from around the world bring "new ideas and innovation".

An RDG spokesman said: "Franchising has helped to transform the finances of Britain's railway, meaning there is more money to support investment in improvements to make journeys better and local economies stronger, now and for the long term.

"The whole rail industry is focused on delivering the successful railway Britain will need as it exits the European Union.

"This includes working with governments and other authorities to evolve the franchising process so that it continues to deliver for passengers and taxpayers."