Work-from-home shunts UK rail towards state siding

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

LONDON – Britain’s messy, 25-year experiment with privatised rail could be heading for the buffers. A post-virus switch towards homeworking is likely to lead to less crowded trains, higher government subsidies and, eventually, a business that is less irrational and possibly more efficient.

The number of UK rail passengers fell by 95% after the government’s March 23 restrictions. Numbers are starting to recover, but the state is still underwriting substantial losses at the private train operators. With dividends a distant prospect, it amounts to de facto nationalisation.

Subsidies were essential for the system’s survival before the pandemic. The net 4.3 billion pounds received in fiscal 2019 amounted to 40% of revenue from tickets. A switch towards homeworking will increase the dependency.

By how much Passenger numbers are still down 75%, and watchdog Transport Focus reckons two-thirds of rail commuters will work from home more. That makes a 40% structural decline in fares, equating to 4.2 billion pounds in lost revenue, look plausible. The train operators could compensate with higher fares, fewer trains and lower headcounts, but there are limits. After all, unattractive trains push commuters to cars, which are much worse for the environment. And smooth transport connections help spread wealth and opportunity, not to mention pleasing a large and vocal group of voters.

Suppose the operators manage to save 500 million pounds. Then, the government subsidy would just about double from pre-pandemic levels to 8 billion pounds annually. The 218 million pounds in dividends that private investors walked off with last year would likely be politically unacceptable.

Renationalisation is the obvious solution. It is true that the old British Rail was a favoured example of the problems with state-run monopolies, but it is also true that the half-nationalised mishmash that replaced it is a favoured example of the perils of privatising structurally loss-making natural monopolies.

As it stands, bosses of the UK’s renationalised track are often at loggerheads with the franchised rolling-stock operators. Passengers’ humble desire to arrive vaguely on time often seems to get lost amidst disputes over payments and penalties. In a new rail company suitable for the work-from-home ethic, the buck will at least stop at a single destination.


– Accountancy firm PricewaterhouseCoopers and investment bank Schroders will let the majority of their employees continue to work from home after the Covid-19 pandemic has subsided, the Guardian reported on Aug. 17.

– Industry watchdog Transport Focus said on Aug. 18 that two-thirds of normal rail commuters planned to work from home more on a permanent basis. It also called for a shakeup of the fares system, to allow for more flexible season tickets for those wanting to travel less than five days a week.

– Following a “stay at home” lockdown announced on March 23, UK rail passenger use dropped to around 5% of pre-pandemic levels, according to the Department for Transport. Since the easing of restrictions, that proportion has increased to around 25%.

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

(Editing by Edward Hadas and Karen Kwok) (([email protected]; Reuters Messaging: [email protected]))

Source Article