Network Rail hit by rise in borrowings

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Network Rail plunged deeper into the red in the first half of the year after a sharp rise in borrowings at the state-controlled infrastructure operator.

Losses for the six-month period to the end of September rose from £8m to £108m after a £153m increase in the company's interest payments. This followed a £3bn increase in the company's net debts from £13.9bn to £16.8bn.

The RMT rail union claimed if Network Rail was taken fully into public ownership then it could save £650m a year through lower interest charges and bringing track renewal work in-house.

But John Armitt, Network Rail's chief executive, rejected the union's figures, saying interest charges would fall only by a fraction under public ownership because it could already borrow more cheaply than almost anyone except the Government. It issued an £870m bond last week at the same interest rate as the European Investment Bank pays. Mr Armitt also said although debts were climbing, borrowings were not as high as forecast. They had been scheduled to hit £18bn by now and peak at £22bn in 2008-9 but will now reach £20bn.

Operating expenditure, including maintenance spending, fell £100m, keeping Network Rail on course to achieve the 31 per cent efficiency target set by the Rail Regulator, while investment in the railways reached £1.4bn. Punctuality on a moving annual basis reached 85 per cent in September compared with 81.8 per cent a year earlier.

Network Rail's revenues will rise by £2bn next year when its government grant increases. Mr Armitt said it would then have to decide whether to use the surplus to pay off debt or expand capacity.