Optimising Britain's Railways - Economic Perspectives

Great Britain has a railway industry which appears to be a rare case study within an international context. The market has been privatised and restructured, with multiple companies operating freight and passenger services on a network managed by a single infrastructure manager – Network Rail. The reforms introduced by Great Britain between 1994 and 1997 are some of the fastest and widest undertaken across the world. Britain has adopted an incentivisation mechanism to ensure the infrastructure manager and operators perform in terms of punctuality and reliability. The incentive mechanism is referred to as Schedule 8.

The industry offers a valuable case study for other railway industries internationally and, particularly, within the European Union (EU). The EU has issued Directives to their member states to require their railways to reform in a similar manner to the British railway industry. The Directives also require member states to adopt incentive mechanisms to ensure the infrastructure manager performs. As more countries are likely to open-up their railway markets to competition, the British case study offers evidence on the effects of performance on social welfare in a market open to such competition.

In this thesis report, evidence is generated to demonstrate the value of punctuality and reliability within the British market structure. The effect of performance on different industry stakeholders is considered and evaluated to derive an understanding of the marginal social welfare effects resulting from changes in performance. It is believed that this research is the first attempt in the literature to reconcile the effects of performance on the demand and supply-sides of the railway industry; one of the earliest to estimate and discuss Extended Generalised Journey Time (EGJT) elasticities; and is a rare study in investigating the effects of a performance incentive mechanism.