ORR warns Network Rail asset condition is deteriorating after renewal programme scaled back

Network Rail is facing growing scrutiny from the rail regulator after reducing planned infrastructure renewals, raising concerns that asset condition targets for England and Wales will not be achieved by the end of the current funding period.

The Office of Rail and Road (ORR) has warned that cuts to renewal activity, introduced to address financial pressures, are leaving the infrastructure manager on course to miss key infrastructure sustainability objectives set for Control Period 7 (CP7), which runs until March 2029.

In its latest assessment of Network Rail's performance, the regulator said the organisation is now expected to complete only 83% of the renewals programme originally planned for England and Wales during the five-year control period.

That reduction, the ORR said, means the company is now unlikely to meet its agreed asset sustainability targets, prompting concerns over the long-term condition of the railway.

The regulator measures infrastructure health using a composite sustainability index that assesses the predicted remaining life of railway assets.

Under the targets established in 2023, Network Rail was expected to limit the deterioration of assets across its regions. However, revised forecasts indicate that performance in England and Wales will fall short of those expectations.

The ORR now expects the overall asset condition score for England and Wales to decline by 2.7 percentage points, exceeding the permitted reduction of 2.5 percentage points. By comparison, Scotland remains on course to outperform its target, with a projected decline of 1.6 percentage points against an allowance of 2.1 percentage points.

The regulator warned that delaying renewal work could have significant long-term consequences.

"An increasingly ageing asset base has implications for asset reliability, performance and safety.

"This reduction in renewals volumes and deferral of work will increase future investment requirements and increases the likelihood of accelerated asset deterioration. If not mitigated, there is risk of more asset failures and worse safety and performance outcomes in the long-term."

The ORR has asked Network Rail to provide further evidence demonstrating how it intends to limit further deterioration while protecting safety and operational performance.

While acknowledging that the organisation has outlined several regional initiatives aimed at rebalancing maintenance, renewals and minor works, the regulator said more robust evidence is required.

"The company has responded and provided some positive evidence of ongoing regional initiatives to rebalance renewals, minor works and maintenance and to stabilise its plans. However, further evidence is required to better demonstrate this.

"Continued focus is required to maintain stable plans as far as possible over the remainder of CP7 to minimise long-term cost impact.

"We remain concerned and this will be our priority area of focus for the coming year."

According to the report, the reduction in renewal activity stems largely from financial pressures caused by sustained inflation.

The ORR said Network Rail entered CP7 with a funding shortfall between its allocated settlement and planned expenditure in England and Wales, with the gap subsequently closed primarily through reductions to planned renewal schemes.

Responding to the report, a Network Rail spokesperson said the organisation continues to prioritise safety while adapting its investment programme to reflect rising costs.

"As we move towards Great British Railways, bringing track and train together will help us to better deliver for passengers, freight and the wider UK economy in a more joined-up way.

"Due to challenges posed by sustained higher inflation and costs, we have had to delay some of our renewals work. However, we are implementing a range of mitigation measures in those areas, including targeting investment at the most important maintenance activity, to mitigate the risk to performance and safety.

"Delivering a safe railway for everyone remains our highest priority – and we continue to engage closely with our regulator and other rail sector stakeholders to ensure all decisions are carefully considered and based on clear evidence."