BR managers fear franchising 'flaws'
Wednesday 10 February 1993
They warn that the wrong sort of investors could be attracted, long-term investment crippled and profitability become impossible unless the Government is prepared to alter its proposals.
The criticism comes from managers of InterCity Great Western and InterCity East Coast, two of British Rail's most profitable networks, and reflects widespread unease about the plans among railway managers.
Great Western runs services from London to South Wales and the West Country, while East Coast operates from the capital to York, Newcastle upon Tyne and Scotland. Both were among the first seven prospective franchises disclosed last week.
Brian Scott, director of Great Western, has written to John MacGregor, Secretary of State for Transport, saying that the proposal to franchise out services while the infrastructure is run by a new, separate track authority will discourage the right sort of investors. 'As an experienced, professional railway business manager I would not put my money into a train-operating company . . . without having day-to-day control of operations, including signalling and track and signals maintenance.
'I am not surprised to see that prospective private sector operators have been making the same point. Whoever runs the business would be committing an act of folly to buy into something with so little control of performance and, therefore, profit.'
In his letter, Mr Scott, who favours privatisation and is interested in a management buyout, also says that the proposed franchises of five to 10 years are too short to encourage investment in equipment and other assets that will last for 25 to 30 years.
The current annual pounds 20m investment by Great Western needs to be trebled to pounds 60m by the beginning of the next century just to replace present assets, Mr Scott says. 'If this increase in investment is not under way within three years, a spiral of decline will prevent anyone making any profits on Great Western. The system is already coming under strain.'
Mr Scott said yesterday that the decision to write the letter was his own but the views were 'widespread throughout British Rail and the private sector'. He was supported by an InterCity East Coast spokesman: 'We share many of the reservations . . . and have made such points . . . to the Secretary of State's market-testing department.'
A Department of Transport spokeswoman said: 'The Secretary of State will be writing to Mr Scott. Ministers believe the proposals will encourage competition and that it will be better to have investment in the track in a single pair of hands.'
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