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02/12/2020

Watchdog reveals scale of Covid-19 impact on rail industry

Words: Huw Morris
Railway tracks / iStock-624925672

The Covid-19 pandemic caused a catastrophic collapse in the number of rail passengers, forcing the government to bail out the industry with £1.7 billion up to June.

Figures released by the National Audit Office (NAO) in its overview of Department for Transport (DfT) spending this year reveal that rail passenger numbers fell from 97 per cent of their normal lives in the first week of March to 5 per cent by the end of that month, when the first lockdown was fully in force.

The public spending watchdog acknowledged the collapse threatening the financial viability of rail operators, promoting the DfT to launch emergency measures agreements, which transferred all revenue and cost risks to the department from operators. Operators were paid a fixed management fee for operating services, with a potential performance payment based on reliability, punctuality and other targets.

The DfT spent £289 million through these agreements in March 2020, and an average of £557 million in each of the first three rail periods of 2020-21, totalling £1.7 billion up to 27 June 2020. 

Since March, rail passenger numbers have remained low, with average usage around 37 per cent of the previous year across August and September 2020. Until passenger numbers return to pre-pandemic levels, the government anticipates that “significant taxpayer support will be needed to continue railway services”, says the NAO.

The overview also acknowledges that the full business case for phase one of HS2 was prepared before the Covid-19 pandemic and the DfT has not yet fully assessed its impact on the value for money of the programme. 

The DfT has promised to assess the pandemic’s impact on long-term rail demand and other modelling assumptions towards the end of 2020. HS2 Ltd is also expected to provide an updated estimate of the impact of Covid-19 in the next six months. 

Work on phase one is under way at more than 250 sites between London and Birmingham, although much of this remains off-site, developing further designs and logistics plans, says the NAO.

Departmental Overview 2019-20, Department for Transport can be found on the National Audit Office website (pdf).

Image credit | iStock

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