A year in review: Office of Rail and Road’s annual report published

The Office of Rail and Road (ORR) released their annual report on the state of the national rail industry this week, highlighting the income/outcome results and the number of passengers in the 2022-2023 year. The annual report provides key information regarding not only the finances of the rail sector, but also what has affected these numbers, including evidence from government policy and funding across the entire UK. All the statistics from the past year are contextualised by the inclusion of figures from the past five years, with the financial year 2017-18 used as a point of reference and comparison throughout.

The information contained in the report comes from numerous sources including passenger train operator management accounts, regulatory finance reports from Network Rail and HS1 (the former audited, the latter not), company accounts from freight companies, Northern Ireland Railways and rolling stock companies, and from bespoke requested reports from franchised operators and infrastructure companies. Government reports, such as those from the Department for Transport (DfT) and miscellaneous expenditure (such as Transport Police, Transport Focus etc.) were also included.

Background to the ORR

The ORR is an independent statutory body, with certain powers vested by the UK Parliament in the governing board. ORR’s main responsibility is to monitor both the performance and efficiency of the rail and road networks, ensuring that Network Rail and High Speed One are held to account. Not only do ORR oversee all health and safety across all railways in the UK, as well as any light rail/tram system, but they also ensure that the passenger service meet certain requirements.

Key takeaways from the report

In the last year, FY2023, ORR reported that passenger revenue continued to recover from the pandemic years, which allowed government revenue to fall. The opening of services on the central section of the Elizabeth line contributed to the increase in passenger revenue and is now a major part of London’s transportation network.

Income for the operational rail industry was £22.7 billion, which, when adjusted for inflation, is a decrease of 3.2% from the previous year. This consisted of £11.9 billion from government funding, £9.2 billion from passenger operators (£8.6 billion of fares and £0.6 billion of other operator income), and £1.5 billion from other sources.

Expenditure for the operational rail industry was £25.4 billion. Likewise, when adjusted for inflation this is a 1% increase from the previous year. This consisted of £12.4 billion of Network Rail expenditure, £11.7 billion of franchised train operator expenditure, and £1.3 billion of expenditure by other parts of the rail industry.

“Our official statistics are an important barometer of the financial health of Britain’s railways. This year, in the context of rising inflation and industrial action, we see that rail has continued its post pandemic recovery. Passenger journeys have increased significantly, helped in part due to the Elizabeth line’s opening, and were 40% up on the previous year,” said Director of Economics, Finance, and Markets at ORR, Will Godfrey.

“Our figures also show that as a result of returning passengers, fare revenue continued to rise and that Government support for the day to day running of the railway has reduced,” Godfrey added.

Reactions from the Industry

Other figures from the industry have reacted to the findings of the report, either releasing statements or posting their reactions on social media. Andy Bagnall, Chief Executive of Rail Partners, the firm which represents members of the rail industry in national debates in the transitional period, as outlined by the Williams-Shapps Plan, published his thoughts on the report.

“The most recent ORR data shows that contracted operators have substantially reduced the levels of public subsidy. However, revenues are still well short of pre pandemic levels and industry finances remain unsustainable,” Bagnall said.

“To protect the long term economic and environmental benefits the railway brings, passenger contracts need to be rapidly evolved to give operators the commercial freedoms and incentives they need to attract passengers back, unlock further revenue growth and control costs – putting the railway on a sustainable footing,” Bagnall added.

The ORR report has provided a comprehensive overview of the last year in the rail industry, covering the financial income/outcome details while providing possible reasonings for any fluctuations. The full report can be found on the ORR website, and is downloadable in PDF format.