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Business Comment

Mark Leftly: Network Rail fails to account for Potters Bar

Even the warmest of summer days can turn cold when Iain Coucher is in brusque mood.

At a dinner in June, I asked the then Network Rail chief executive whether the taxpayer-backed company had set aside any cash in its accounts in case it was ever prosecuted over the 2002 Potters Bar train crash.

Coucher replied with a terse "No", elaboration clearly not one of his fortes. I was shocked that he could be so dismissive, outraged that the man in charge of running and maintaining this country's precious rail infrastructure should be so short-sighted.

True, the Crown Prosecution Service advised the British Transport Police back in 2005 that there was little chance of conviction for an offence of gross negligence manslaughter, be it against an organisation or an individual.

But public pressure for prosecution has rarely waned since those seven commuters died in that dreadful derailment in May, eight years ago. And at the time of this dinner, scrutiny of the incident was at its greatest; an inquest was finally under way, and it later decided that maintenance failures led to the disaster. Plus, there are charges aside from manslaughter that did have the potential to go to court.

On Wednesday, the Office of Rail Regulation said it was starting criminal proceedings against Network Rail and Jarvis Rail, the maintenance contractor on the line at the time, over health and safety breaches.

Network Rail inherited the existing and potential liabilities of Railtrack when it took ownership of that failed organisation in October 2002. Fingers were often pointed at Jarvis, but the contractor had worked to a health-and-safety regime established by Railtrack. It was almost inevitable that should Jarvis ever be put in the dock, Network Rail would be there too.

Earlier this year, Jarvis collapsed. Administrator Deloitte will surely tell Watford magistrates' court that Jarvis Rail has no assets, no staff, no future. Should the court find against Jarvis the fine will simply join the long list of monies owed to creditors who will be lucky to receive but a fraction of what is owed.

Should Network Rail lose, the organisation will cut its maintenance budget accordingly. Public money – and the fine is potentially unlimited – that was earmarked to sort our creaking train lines will be gobbled up.

Coucher was not the boss in 2002, but he was in charge for a good three years and had every opportunity to make a writedown. In all likelihood, a fine would be somewhere between £1m and £5m. A prudent company, particularly one that lives and breathes taxpayer's money, would have written down at least £5m long ago.

If Network Rail is found to have been wrongly accused, that £5m could then be released back into the accounts. That would be a £5m boost to this year's maintenance budget.

I am told that Network Rail will show some significant cost savings when it releases its financial figures later this month. Great news, if the more efficient use of money results in more cash being available for investment. Not so great if the tough measures needed to make those savings simply help Network Rail absorb a fine that it should have prepared itself for long, long before 2011.

David Higgins, the clever Australian in charge of building for the 2012 Olympics, must be fuming. His astute, prudent leadership should mean that London 2012 comes in £500m under its current budget (yes, I know London's 2012 budget increased nearly fourfold in 2007, but that was the fault of the bid team's miscalculations).

Job all but done, Higgins becomes Network Rail's chief executive in February. But while he's still at the Olympic Delivery Authority, Higgins should pop into the office of his chairman, John Armitt.

Armitt was Coucher's predecessor at Network Rail. Maybe Higgins would like to know why Network Rail didn't have the good sense a long time ago to account for this potential liability, and why he might now have to pick up the pieces.

Potters Bar was a tragedy that left scars on anyone even vaguely involved. I know a former senior director at Jarvis, who had no responsibility for the rail division, who still wakes up in a cold sweat at the nightmare. The repercussions of the crash were never going to go away. Network Rail's accounts should have reflected this, and its leaders should never have just hoped it would be forgotten.

Rok's Snook is not the centre of a perfect storm, but a good man beset by human error

A perfect storm is, by its very definition, flawless. And yet when this immaculate phenomenon rages it wreaks little but havoc and destruction.

A construction boss suggested that it was just such a storm that caused Rok, the self-proclaimed "nation's local builder", to go into administration last Monday.

The perfect storm was a mixture of suppliers demanding faster and greater payment, a third-quarter review of business units that showed all of them were losing sales, and government cuts halting vital local authority work.

A declaration of interest here: I've known the splendidly named Garvis Snook since I was a pup reporter in the trade press and think that he is a good bloke. Snook, the long-time chief executive, took Rok from being a small-time Exeter builder to a national group worth £450m, yet never displayed any of the arrogance and unnecessary aggression that characterise many of his peers in the construction industry.

He was always approachable, chatty and likeable, despite the dad-dancing-at-a-wedding photographs of him in a leather jacket sitting on a motorbike and irritatingly cheesy initiatives like creating the post of "people director".

So, I'm biased when I say that I believe Snook was honest in his 11 October email to staff, when he told them that their jobs were safe and that the company was "resilient".

Snook has taken a lot of flak over this email, the implication being that he was purposely misleading his staff. But I think that Snook believed what he said. I think that it came as a horrible shock when the heads of his business units warned just how badly they were faring.

Unfortunately, that leaves me with an uncomfortable conclusion: Rok's failure has to be down to a man who did not realise just how bad things were until the bare facts came out in a three monthly review.

This was human error, not a perfect storm.