UK Government Announces Termination of Rail Franchise

The model of granting private operators the rights to service routes has been used for 24 years, but has not stood the test of the pandemic crisis

The Private Operators' Route Service Model has been in use for 24 years, but has not stood the test of the pandemic crisis |  Passenger Transportation

The UK Department of Transport has announced the termination of the use of franchises for serving railway passengers in the country’s transport services market. This was reported in a press release from the department.

The franchises will be gradually replaced by a new system designed to create a simpler and more efficient service structure, which is planned to be formed in the coming months. In the first phase, starting September 21, rail operators are being transferred to transition contracts – the franchising is being replaced by more demanding Emergency Recovery Action Agreements (ERMA).

The new agreements include tighter performance targets and lower management fees. Such contracts allow early start on key reforms, including requiring operators to better coordinate with each other and reduce excessive capital costs. These measures are aimed at addressing the ongoing impact of the COVID-19 pandemic on the industry.

En-route traffic management fees will now be no more than 1.5% of the baseline franchise costs prior to the outbreak of the pandemic. At the same time, operators must provide almost complete service for passenger traffic.

UK Transport Secretary Grant Shapps stressed that the franchise privatization model, adopted some 25 years ago, has resulted in a significant increase in passenger numbers, but the coronavirus pandemic has proven it no longer works.

“Our new course for railways requires more for passengers. This will make it easier for people to travel by ending the uncertainty and confusion about whether you are using the right ticket or the right train company, ”he said.

The new model will retain the best elements of the private sector, including competition and investment, that have fueled growth, he said, while providing strategic direction, leadership and accountability.

In April, the UK government suspended for six months, the operation of all franchises for passenger services and offered operators a choice: to sign a package of agreements on emergency measures (EMA) or not. In the event of a refusal, the operator bore all risks of income and expenses himself. Several operators not included in the EMA have suspended the provision of services on the railways.

In early August, the UK government reclassified 14 private rail operators as public non-financial corporations to support 14 private rail operators . This measure applies to companies that in March entered into a package of emergency agreements with the governments of England and Scotland, introduced in connection with the COVID-19 pandemic.

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