Transport Secretary Heidi Alexander has cautioned that new open access rail services should be carefully scrutinised. She has issued additional advice to the Office of Rail and Road (ORR)—which approves open access licences—clarifying her expectations, although she noted that the formal guidance itself remains unchanged.
Revenue ‘Abstraction’ and Public Investment
Historically, the key test for open access approvals has been to ensure that any new service does not siphon off revenue from operators running government-backed services (formerly known as franchises). Under the old franchise model, revenue loss would effectively mean fewer funds going back to the taxpayer. Even though the remaining government contracts have shifted to National Rail Contracts, the concern over revenue ‘abstraction’ remains.
Labour’s Policy on Renationalisation
Since Labour pledged to bring remaining private rail contracts back under public ownership, private sector operators have increased their focus on open access proposals. Labour had previously stated that any open access services offering additional value or capacity could continue. However, Ms. Alexander’s letter adds a cautionary note, warning that new services can strain already congested infrastructure and reduce returns on public investment. She also points out that open access operators do not pay the full range of track access charges, putting them at an advantage compared to publicly contracted operators.
Impact on Potential and Existing Operators
The ORR has already granted several open access licences, and more applications are underway. However, Naomi Horton, a rail partner at law firm Ashurst, suggests the new guidance implies a higher hurdle for approving future open access services. This includes proving they can bring genuine innovation or tap into new markets, on top of meeting the existing requirement not to ‘primarily abstract’ revenue from the publicly operated services.
FirstGroup Under Scrutiny
One major operator, FirstGroup, has already lost the Transpennine Express contract and expects to see its contracts for South Western Railway, Great Western Railway, and Avanti West Coast taken back under public ownership as well. To date, FirstGroup—alongside other private operators—has not commented on Ms. Alexander’s updated guidance.
Following the announcement, FirstGroup’s shares dipped by 0.73%.
