Network Rail urges ministers to back employee buy-out

Network Rail chiefs are to urge the Government to back an employee buyout of the company after it swung into profit last year with the help of a £1.2bn increase in public subsidies.

Network Rail chiefs are to urge the Government to back an employee buyout of the company after it swung into profit last year with the help of a £1.2bn increase in public subsidies.

John Armitt, the chief executive, said he was attracted to the idea of a John Lewis-style part privatisation of the business along the lines of that being proposed for the state-owned Royal Mail.

The company, which owns the nation's rail tracks, signalling and stations, made an operating profit last year of £407m compared with a £758m loss the previous year - but only after a £2bn revenue grant from the Strategic Rail Authority boosted its income from £2.6bn to £3.8bn.

Network Rail is a "not for dividend" company limited by guarantee which was set up by the Government three years ago to replace the publicly-quoted Railtrack. It is classed as a private company for the purposes of the national accounts but it is to all intents and purposes publicly-controlled because its debts are guaranteed by government.

Mr Armitt said an employee buyout would give its 30,000 staff a direct stake in the business and a much greater incentive to improve performance. "If Royal Mail can do it, then why can't we?" he said. "If we had 30,000 people out there who knew that what they took home would be driven by the performance of the company, that would be a powerful incentive. You can do it with staff bonuses but having actual ownership of the business is much better. I am attracted by that idea."

Network Rail is not thought to have put any formal proposals to ministers yet. The earliest that the company is likely to be in a fit state to be part-privatised is 2006-07 when it is scheduled to make a bottom-line profit because the grants it receives will rise by a further £1.6bn. The company recorded a pre-tax loss last year of £164m - down from £1.070bn the previous year. The interest charge almost doubled to £640m after net debts increased by £3bn to £15.6bn. Mr Armitt said about half the financial turnaround last year was due to increased grants and half was due to improved performance.

Network Rail received a net payment of £102m under the industry's performance regime compared with the £348m penalty it paid the previous year. Mr Armitt said taking track maintenance back in-house had cut its bill by about £100m , or 7 to 8 per cent.

Delays attributable to Network Rail fell 17 per cent, even though nearly one in five trains continued to run late while 626 miles of track were laid - double the level five years ago.