Rail regulators today ruled that Network Rail (NR) was in breach of its licence over declining punctuality levels.
The Office of Rail Regulation (ORR) has proposed two enforcement orders requiring NR to develop "new robust plans to help recover performance".
The ORR has found that NR is contravening its network licence in respect of declining performance in the freight sector.
It also found that the company was likely to contravene its network licence in respect of deteriorating performance of long-distance passenger services.
The ORR said long-distance punctuality was currently 87.1%, well short of the regulatory target of running 90.9% trains on time.
The ORR went on: "NR has admitted it is not able to deliver the target this year, and is also likely to miss next year's.
"We need to be satisfied that NR is doing everything reasonably practicable to achieve its targets, but has been hindered by the lack of robust quantification of initiatives and projections in the plans the company has produced."
The enforcement orders require NR to work with the relevant passenger operators to produce, by the end of February 2012, robust plans showing that it is doing everything reasonably practicable to deliver the performance commitments for long distance services in 2012/2013.
The ORR also called on NR to establish a "recovery board" for freight performance at which the freight operators can call on the company to take specific measures to tackle performance for freight services - the first time such a mechanism has been used.
After further extensive investigation, the ORR has decided that NR is not in breach of its licence with regard to performance in Scotland and has robust plans in place to achieve improvements.
This means that the ORR will be taking no formal action at this stage, but will be watching closely to ensure improvements are made.
ORR chief executive Richard Price said: "Rail customers expect high levels of train punctuality. NR has achieved a lot in recent years, but while it signed up to improve performance year-on-year, its performance is now worsening.
"The company must do everything reasonably practicable to reach its targets and needs to deliver robust plans to prove that it is tackling declining performance, working with train operators to put things right."
Mr Price went on: "Factors outside NR's control have contributed to the performance gap, but they do not account for the whole of the discrepancy.
Our investigation found that the recent deterioration in performance is down to factors including major asset failures, congested routes and poor management of track condition, in addition to external factors like cable theft.
"NR must shoulder the responsibility for any weakness in its performance. I am also today encouraging passenger and freight operators to work with NR to get the most out of the network for customers."
NR chief executive David Higgins said: "We don't take any licence breach lightly and are fully focused on driving up performance across Britain's railway.
"Over the last few years the industry has raised performance levels to amongst the best in Europe with over 91% of trains arriving on time. Volumes are high and growing and where the industry has focused its efforts there have been improvements."
He continued: "Yet, we acknowledge that in parts of the country passenger and freight performance does not meet the standards that our customers now rightly demand.
"Working with our industry partners, we are committed to understanding the issues behind these problems and resolving them."