Tory contracts boosted rail fat cats’ profits

Train operating companies are only back in profit thanks to transport secretary Grant Shapps’s pandemic bailouts and new rail contracts, according to a new RMT report published today.

The report Bailing out the TOCs, based on analysis of the train operating companies’ accounts, reveals how the government’s switch to management-fee based contracts that guarantee profits of around £124 million each year has restored profits for the year of £600 million across the industry for 2020-21, with every owning group improving its position during the pandemic year.

The report also shows how the TOCs, having lobbied for these changes since before the pandemic because of the failures of franchising, are now reassuring their investors that they’re well placed to pay out regular dividends from their rail operations.

RMT general secretary Mick Lynch said that the government and the rail fat cats were working together to turn fares and taxes into profits for shareholders at public expense.

“I’m sure the fat cats will find a nice way to thanks Grant Shapps for his commitment to their bank balances but ordinary working people, rail workers and the travelling and tax-paying public are suffering as the attack on our public transport system is added to the escalating cost of living crisis,” he said.

The report shows that:

• Emergency funding agreements and its new rail contracts have taken all the financial risk out of train operating and rescued the profits of companies that were struggling before the pandemic.
• DfT data shows that during between March 2020 and April 2022, the TOCs will have received around £300 million in management fees, which form the basis of their profits. (Table 1)
• Analysis of the TOCs company accounts shows that the new funding agreements and contracts transformed the position of the train operating companies, restoring their profits to an aggregate of £600 million for the year 2020-21, compared with a significantly worse position prior to the pandemic.(Table 2)
• In just one year South-Western Railways went from a £4 million loss to a £28 million profit for the year. First Transpennine Express went from a £6.5 million loss to a £57 million profit. FirstGroup’s profits for the year from its four contracts trebled from £46 million to £132 million. (Table 3)
• Abellio Greater Anglia went from a £300 million loss to a £295 million profit for the year. Abellio’s Group position was similarly transformed, from a recorded loss of £493 million to a profit of £426 million. (Table 4)
• Go-Ahead’s profits also rose between 2019 and 21 as the margins increased on Thameslink, Southern and Great Northern and would probably have increased further had the DfT not had to step in and strip Go-Ahead of the Southeastern franchise for concealing money owed to the public over years. (Table 5)
• Dividend payments have remained healthy, with £73.5 million declared so far for 2020-21, while the TOCs are forecasting that they are well-placed for future dividend payments over 2022. (Table 2)