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Monday, September 25, 2023

ORR report shows Network Rail exceeded planned efficiency improvements and new employment study focuses in on pay and reward

The Office of Rail and Road (ORR) has today published its annual assessment of Network Rail’s efficiency and wider financial performance for 2021-2022, alongside the findings of a review into employment costs in the rail industry.

ORR found the infrastructure manager’s delivery of efficiencies remains good, with Network Rail reporting £840 million of efficiency improvements for the year, ahead of its £830 million target.

Network Rail has now delivered £1.9 billion of efficiency improvements across the first three years of Control Period 6 (2019-2024). Network Rail now aims to deliver £4 billion of efficiency improvements across the five-year control period ending in 2024, an increase on the £3.5 billion target originally set by ORR.

The planned increase is mostly coming from workforce reform initiatives.

Despite these efficiency gains, wider financial performance missed its target by £487 million in 2021-2022. Cumulatively, over the first three years of the current control period, Network Rail is £891m below the target set in its delivery plan. This is mostly due to cost pressures and reduced income exceeding the amount of efficiency improvements.

ORR also commissioned independent consultants to establish whether rail industry employment costs are higher or lower than market comparators.

The study compared pay and total reward (which includes pension costs and other measurable benefits) of 64,459 rail industry workers, and found that in some areas of the industry, pay and conditions are favourable when compared with the wider market.

The benchmarking analysis found that total reward at Network Rail is largely within market rates (+/- 10%), with the exception of maintenance staff. Their total reward is 18% above the market median. Within the broad categories of head office and operations, certain roles at Network Rail also sit outside market rates. For some job categories the result is sensitive to whether looking at total reward or just pay.

Total reward at passenger train operators is also largely within market, apart from station staff who are paid 12% above the market median, and operational management who are paid 11% below. Again, for some job categories the result is sensitive to whether looking at total reward or just pay.

Will Godfrey, ORR’s Director of Economics, Finance and Markets, said:

“ORR’s annual assessment of Network Rail’s efficiency and financial performance is an important part of how we hold the company to account each year. This year, we have supplemented our work with a study of employment costs. 

“We were asked to undertake this study in the white paper on rail reform. And I’d like to thank all the companies who participated. It is a good first step in improving transparency.

“The complexity of rail pay arrangements can make it difficult for companies to produce data and to also make comparisons on a consistent basis. Particularly when the study depends on being able to find suitable comparators for rail jobs, which is easier for some types of jobs than others.  

“The findings have identified areas where train operating companies and Network Rail can undertake further analysis of pay structures. We will now consider in consultation with industry the scope to update and refine this dataset.”

Photo credit: ORR

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