How Covid wrecked UK railway finances and sparked strike threat

Britain’s rail passengers are braced for a summer of chaos with thousands of workers set to walk out in what is expected to be the biggest strike to hit the network in 30 years as the post-Covid drop in travel adds to pressure on the industry to cut costs and axe jobs.

A ballot of more than 40,000 rail workers returned what the RMT union described as the “biggest endorsement” for industrial action since privatisation in the mid-1990s after it announced the result late Tuesday night.

Staff at state-owned infrastructure manager Network Rail and 13 train operators voted overwhelmingly for strike action. Network Rail has warned of widespread disruption if signallers walk out for longer than a 72-hour period.

The union has criticised what it says are plans by Network Rail, the state-owned infrastructure operator, to cut 2,500 “safety-critical” jobs, adding that rail staff have already had their pay frozen and contracts threatened.

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In contrast, Network Rail has denied having a target for job losses and said it had not yet tabled any formal proposals for cost-cutting, although it has “informally discussed some ideas”.

Both sides have called for further talks to try to avert an all-out strike but railway executives are preparing emergency plans to slash timetables and run a skeleton service for as little as 12 hours a day should those fail. Meanwhile, the RMT’s executive council will discuss a timetable for strike action from mid-June.

Transport secretary Grant Shapps has threatened to tighten the law to make rail strikes more difficult by introducing new “minimum service agreements” on the lines. He also accused union leaders of failing to recognise that the coronavirus pandemic had led to a “seismic shift” with people coming into the office less.

The UK is leading the way in Europe in a shift to hybrid working with commuter numbers still almost a quarter down on levels seen in February 2020 before the pandemic hit, according to a recent Financial Times analysis.

This trend has a direct impact on the business model of rail operators. The leisure travel segment has seen the strongest bounceback. But commuter numbers are still heavily suppressed and nationwide passenger rail numbers have returned to only about 75 per cent of pre-coronavirus levels, according to the latest Department for Transport data.

South Western Railway, the commuter-heavy franchise that runs services into London’s Waterloo, traditionally Britain’s busiest railway station, said morning peak arrivals have only recovered to half of their pre-Covid levels.

Track maintenance is seen as an area that is ripe for cuts © Simon Dawson/Bloomberg

Its passenger surveys showed commuters only expect to make 60 per cent of the journeys they used to, in line with working three days a week in the office.

The resulting loss of ticket revenues has left a £2bn a year funding gap for the industry, at the same time as government support introduced during the pandemic to assist train operators tapers off.

During the Covid crisis the government poured about £14bn into the UK railways, after effectively nationalising the privatised operators in 2020 as people were ordered to work from home.

“It is increasingly clear that the business model for our industry has changed forever,” Andy Bagnall, director-general of the Rail Delivery Group, which represents train operators and Network Rail, said at a recent transport conference.

“Something has to give,” said an executive at one train company. Ministers believe further subsidies would be politically unpalatable given the demands on other services, such as the NHS. Similarly, increasing fares further would prove unpopular as would further cuts in services with operators still running reduced timetables compared with pre-pandemic.

That leaves cost cuts as the only option and ministers believe there is “enormous scope”. One government official gave an example of every track gang having a “lookout” even when no trains were running.

Elsewhere individual workers are still inspecting rails for cracks, when the technology exists to fit cameras to the underside of trains that can scan for microscopic cracks invisible to the human eye.

The ticket office network is seen as another area ripe for cuts with only 13 per cent of tickets now sold through them. This month, the RMT said 1,000 ticket offices were at risk of closure. “There are some of the things that you need to do to modernise,” the official said. “It’s not just cutting costs but it can also provide a better customer experience.”

Train operators, the private companies paid by the government to run rail franchises, have been told by the transport department to find savings of about 10 per cent in this year’s budgets, according to two rail executives.

The threat of industrial action and post-Covid restructuring comes as the railways are moving to a new operating model, reversing many of the changes put in place when they were privatised in the 1990s. This will see a state-run entity assume greater control over the rail operators.

Staff at Network Rail and 13 train operators voted overwhelmingly for strike action © Mark Kerrison/Alamy

But some politicians and rail executives said the industry should be careful it does not go too far. Bagnall warned of the need to avoid “a spiral of decline” where excessive service cuts put people off travelling by rail. “The challenges the railway faces are significant but they are surmountable,” he added.

Tracy Brabin, mayor of West Yorkshire, said trains in her region were regularly overcrowded at weekends following the strong return of leisure trips. “At a time when we are seeing this increase in demand, it is unfathomable that local rail services are being cut.”

The Department for Transport said it was aiming for “a fair deal for staff, passengers and taxpayers” but needed to “overhaul the sector and move it off taxpayer life-support”.

Additional reporting by Jennifer Williams in Manchester

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