Balfour hit as Network Rail reclaims contracts

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The Independent Online

Network Rail, the new state-backed owner of the railways, moved to tighten its grip on the system still further yesterday by taking another two infrastructure maintenance contracts back under its direct control.

Network Rail, the new state-backed owner of the railways, moved to tighten its grip on the system still further yesterday by taking another two infrastructure maintenance contracts back under its direct control.

The not-for-profit company set up last year by the Government after the collapse of Railtrack, also said that its engineers would take much greater responsibility for maintenance decisions right across the network as part of a new approach to managing its private contractors.

Network Rail is to take the Wessex and East Midlands contracts back in-house when they expire in 2004 and 2005 respectively. It had already decided to take back control of maintenance for the Reading area.

The three maintenance contracts together are worth £190m a year to their private contractors and represent about 14 per cent of the total rail network. The Wessex region includes busy commuter lines into London Waterloo from Salisbury and Southampton while the East Midlands area includes inter-city lines out of London Kings Cross to Leicester, Nottingham and Derby.

Balfour Beatty, the maintenance contractor for the Wessex region, said it was "surprised and disappointed" at Network Rail's decision. Shares in the company fell 3 per cent, or 4.75p, to 153.5p. Serco, the contractor for the East Midlands area, put a brave face on the news, saying it was in keeping with its stated aim of "reviewing and exiting, where appropriate, business areas that have limited earnings and growth potential".

John Armitt, the chief executive of Network Rail, said that taking a further two maintenance areas in-house would give it a better understanding of why costs had risen and help it improve performance. The company is under pressure to make savings after a 50 per cent increase in the cost of running the railways since privatisation in 1996 to £9bn a year.

Network Rail said it had no plans to take back any more maintenance contracts unless there were "compelling cost and performance benefits" to be had.

When the Reading area contract was taken back from Amey, Network Rail hinted it might stop there on the grounds that Reading provided a good cross-section of inter-city, commuter and regional routes.

A spokesman said yesterday that it had decided to take control of a further two areas because they had different types of rail infrastructure. The Wessex area runs on the electrified third rail system whereas East Midlands is powered by overhead lines. The Reading area is mainly used by diesel trains.

Under the new rail maintenance regime, Network Rail will decide what work is to be done and when and who will carry out inspections to ensure the work has been carried out to the correct standard. It is also combining the Bristol, Gloucester and Exeter contracts into one new maintenance area.

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