A Railway Fit for Britain's Future? UK government consults the market on plans to reshape Britain’s railways

Imagine a rail network where every journey is seamless, every ticket affordable, and every service reliable. This vision is at the heart of the UK government’s railway reform proposals.

The UK Department for Transport (DfT) has launched a consultation titled “A railway fit for Britain’s future” seeking views on new policies to be included in the forthcoming Railways Bill before 16 April 2025. 

Aimed at unifying a fragmented industry under the leadership of Great British Railways (GBR), the reforms have the potential to reshape the entirety of the UK rail sector. 

This article identifies the key aspects of the proposed reforms and examines their potential impact on various market participants, including train operating companies, manufacturers, freight businesses, rolling stock providers, international services, and technology suppliers. 

The consultation provides the market with a unique opportunity to influence the direction of these reforms. At Bird & Bird, we work with clients across the rail industry to help them understand how regulatory changes may impact their commercial decisions and support a variety of stakeholders in navigating the consultation process and prepare informed responses. 

The Rail Network Today

The consultation identifies the current system as adversely affected by inefficiencies, complex fare structures and coordination challenges which together contribute to delays, high operational costs, poor customer service, and a lack of accountability across the rail system. Further, it stresses that a lack of strategic direction and financial sustainability have prompted the urgent need for this consultation and sets out the below reforms which intend to address long standing and systemic issues in the rail sector.

The British rail network includes numerous actors with fragmented responsibilities across its operation and regulation. 

1. DfT - sets policies and awards franchises to privately owned Train Operating Companies (TOCs).
2. Network Rail - maintains and develops the railway infrastructure, including tracks and stations.
3. Public operating companies – operate passenger services under the DfT operator.
4. Regional government bodes – manage rail services within their respective regions (e.g. Transport Scotland and Transport for Wales).
5. The Office of Rail and Road (ORR) – regulates the rail sector and oversees safety and economic aspects of the railway. 
6. The Rail Delivery Group (RDG) – plays a coordinating role and represents the collective interest of the TOCs and Network Rail. 
7. Private sector suppliers – include train manufacture and privately owned rolling stock companies (ROSCOs);  third party ticketing platforms; and facilities management services (e.g. for depots and stations).
8. Private freight operators – negotiate contracts with Network Rail and comply with ORR rules to access the network.

The Proposed Reforms: A holistic approach affecting all rail participants

The proposed reforms include the following changes to British rail:

• GBR: The creation of GBR, a centralised body responsible for overseeing Britain’s rail infrastructure and services, is being built with a mandate to harmonise the activities of a number of the market participants under a single entity. 
• Ticketing: The government intends to correct the fragmented fare structure inherited from privatisation and simplify fares and ticketing to enhance passenger experience and affordability. 
• Passenger watchdog: The government intends to establish an independent passenger watchdog to strengthen consumer representation, who will be charged with monitoring service quality, addressing complaints and advocating for passenger interests. To ensure its effective functioning with respect to devolved authorities, the consultation envisions that Scottish Ministers, the Welsh Government and the London Assembly will each appoint a member to the board of the new watchdog.  
• Financial framework: The government intends to overhaul the rail funding process and will introduce five-year settlement cycles while allowing GBR flexibility to develop and implement its business plan. 
• Regulator reform: The government intends to substantively change the ORR’s remit, recasting it as an appeals body under the GBR framework, rather than the overarching regulator. 

At its core, the reforms seek to harmonise the “unclear direction and misaligned incentives” which cause the rail network to serve “the system” over passengers and freight. 

Introducing GBR: A consolidating force for the entire sector 

The creation of GBR represents the government’s vision for a British rail network that is fully integrated and where “passengers will travel on GBR trains, running on GBR tracks, and arrive at GBR stations – all run by the expert leadership of a single organisation”. 

To achieve this, GBR will assume many of the functions currently assigned to the DfT, and harmonise the activities of Network Rail, the RDG, the DfT and TOCs under a single organisation empowered to deliver for passengers and freight customers. 

While the Secretary of State will remain responsible for the long-term railway strategy, GBR will be given considerable latitude as to how it operates, with the government seeking to “strip back layers of regulation and confused lines of accountability” and allow GBR to operate with “authority, independence, and clear strategic vision”. 

Importantly, the introduction of GBR does not propose to affect the role of devolved administrations in national and regional rail systems, but rather, encourages GBR to work closely with devolved administrations to ensure coherence across the British rail network.

Regarding Northern Ireland, where the rail sector is currently managed by Translink, the future of Northern Ireland's rail network is being considered through the All-Island Strategic Rail Review. This joint initiative between the DfT in Ireland and the DfI in Northern Ireland intends to undertake a comprehensive review with a view of enhancing and expanding the rail system across the entire island of Ireland up to 2050. 

Overhauling operators: a rethink of the TOC Model 

When fully formed, GBR will absorb the TOCs’ activities as their franchising contracts expire and run passenger services under public ownership. GBR will set timetables, fares and service levels and monitor the TOCs delivery of services. Following the reforms, TOCs will be rebranded as Passenger Service Contracts (PSCs).

Under the proposed reforms, the TOCs will focus on service delivery under their respective PSCs with the commercial risk shifting to GBR. This means that TOCs will operate on fixed fee contracts without the revenue-based incentives which exist under the existing franchise framework. As is understood from the consultation, the ultimate objective appears to be to develop further concession models like the contracts for London Overground and Merseyrail. 

While the policy objectives seem clear, the government has yet to set out detail as to how the contractual shift will occur from a legal and timing perspective. For example, it remains unclear whether a date will be set for TOC contracts to novate into PSCs, or whether those contracts will be allowed to expire under the current arrangements. 

A balancing act: freight and commuters 

In a bid to support the rail sector’s alignment with the government’s long-term decarbonisation strategy and growth targets, the consultation envisages imposing explicit statutory duties on GBR to promote rail freight. However, a concern for freight (and open access) operators may be the proposed transfer of power over access charges from the ORR to GBR. This is because, if GBR sets access charges and prioritises passenger services, TOCs may benefit from preferential access and reduced fees to the detriment of freight operators. While the hope is that by controlling access charges, GBR will be better able to balance the interests of rail stakeholders holistically, in practice, GBR will have to design methods to effectively manage the tension between both improving passenger services and enhancing the role of freight on an already stretched network.

Reshaping rolling stock: the future of ROSCOs

Under the current franchise system, ROSCOs typically buy rolling stock from manufacturers and then lease that stock to TOCs. Each TOC sets their own procurement strategy based upon their individual needs such as the duration of their franchise contract and overarching commercial aims. While this has allowed each TOC to have a degree of strategic autonomy, overall, this structure creates fragmentation and inefficiency across the rail sector as a whole. 

Under the proposed reforms, GBR will assume the role of maintaining and renewing rolling stock, although the decision-making and procurement processes to allow for this remain unclear. Indeed, the proposed reforms avoid mentioning ROSCOs, meaning that their future as private entities under a GBR led rail sector may yet to be determined. On the one hand, GBR may continue to lease rolling stock from ROSCOs and benefit from the expertise and flexibility of specialised private operators, while on the other, GBR may seek to take ownership directly from manufacturers over rolling stock across the network. The latter could enhance standardisation and interoperability of the rail network but will have to ensure that it does not stifle innovation by restricting market access.

Innovation and procurement: important changes for manufacturers

While the proposals do not explicitly address manufacturers, the potential changes to the procurement pipeline under GBR as outlined above will have an effect on manufacturers.  

Under the proposals, GBR will become a “guiding mind” for all aspects of railway, including timetable, maintenance, infrastructure renewal, fare management and network access. As a result, manufacturers may be able to better plan production lines and supply chains thanks to GBR’s ability to better coordinate fleet planning and give more clarity as to the network’s long-term requirements. 

While perhaps beneficial for the network in the short term, an increase in standardisation of rolling stock may ultimately limit innovation for manufacturers if GBR leans towards a single supplier model. Further, it remains unclear what sustainability and decarbonisation targets will be imposed on GBR, and whether manufacturers will be incentivised to invest in hydrogen, battery-electric, or other low-carbon solutions.

This uncertainty within the proposed reforms leaves the following questions for ROSCOs and manufacturers alike:

• Will GBR directly procure and own rolling stock, or will it continue a leasing model?
• How will rolling stock procurement align with PSC contract durations and TOC responsibilities?
• What safeguards will be in place to ensure a competitive rolling stock market rather than a single-supplier model?
• How will GBR ensure continued investment in modern, decarbonised fleets?

Crossing Borders: continuity for international rail 

The proposals include a commitment to accommodate cross-border paths in line with international obligations. In addition, GBR will be obligated to collaborate with international rail infrastructure managers and balance international services alongside the wider network. 

The proposals provide limited details on how this will work in practice beyond ensuring compliance with existing obligations, which include:

• International safety standards as set by bodies like the International Union of Railways (UIC) and the European Union Agency for Railways (ERA). These standards ensure that trains, infrastructure, and operations meet rigorous safety requirements to protect passengers and staff.
• Technical interoperability which, originally developed under EU directives, covers aspects such as signalling, electrification, and rolling stock specifications and ensures seamless cross-border rail services. 
• Passenger rights as outlined in international agreements and EU regulations, such as Regulation (EC) No 1371/2007 on rail passengers' rights and obligations which covers areas like compensation for delays, assistance for disabled passengers, and transparency in ticket pricing.
• Environmental standards and commitments, which may include regulations on emissions, noise pollution, and energy efficiency.

New sales arrangements: the future of online ticketing 

The consultation recognises that overlapping train operator websites, unclear ticket types, and widespread duplication of services make the current system of rail ticketing inefficient and confusing for customers. To address this, the proposed reforms envision a rail system with consolidated tickets and fares where GBR:

• Gradually replaces the 14 websites of the individual DfT operators and integrates ticketing into a single high-quality website and app for customers;
• Sets fares and collects revenue on the service it operates, while allowing open access and devolved operators to retain the powers to set fares on the services they operate; and
• Assumes many of the functions and responsibilities of the RDG, namely managing central retailing systems, standards, and access to information.

Although the consultation makes clear that the government is committed to supporting and promoting the “thriving” third-party retail market, it is unclear at this stage whether third-party retailers will benefit from the same immediate access to data as GBR in terms of (i) availability of tickets, discounts and promotions; (ii) schedules of delays and works; and (iii) ridership figures, all of which are crucial to running a successful ticketing platform. 

Any discrepancies in the quality and availability of data between GBR and third-party retailers may unfairly promote GBR’s ticket offering, and depress competition as a result. As such, although streamlined ticketing may simplify rail travel in the short term, the risk is that GBR becomes the dominant ticketing platform and stifles competition from third party retailers in the long run. Recognising this, the consultation is keen to reassure third party retailers that the integrity of the market will be preserved, but at this stage there is little detail as to how that will work in practice, and how the government will ensure that GBR is not given preferential treatment.

The consultation recognises that GBR may have competing responsibilities in (i) seeking to build and operate an attractive ticket retailing platform, and (ii) simultaneously guaranteeing an open and available market for third party retailers. This is particularly concerning for the third-party retailer licensing regime, currently managed by the RDG, which has the power to determine the terms of third-party licences including the applicable charges and commission rates. Although the consultation intimates that these responsibilities will no longer be the RDG’s, it also concedes that they cannot sit exclusively with GBR for fear of stifling a competitive market. A firmer decision is expected at a later date, and the government is actively considering whether the role of licensing should be shared between GBR, the ORR, and/or another body.

Finally, as part of its commitment to simplifying the ticketing system to make it easier for passengers to “find the right fare”, the consultation envisages that the Secretary of State maintain oversight over the overall affordability of fares. While a political desire to encourage simplification and maintain affordability is welcome, we await further clarity as to how the government plans to balance policy ambitions with making GBR a commercially viable entity. 

Passengers first: a new passenger watchdog

Under the proposed reforms, a new passenger watchdog would be created to build on the work of Transport Focus, which currently represents the interests of Britain's rail passengers. The new body would be given increased powers, enabling it to become a stronger advocate for better passenger experience and to drive up standards in how rail passenger services are delivered. While the exact name and specific roles of the new watchdog are yet to be confirmed, it is understood that it will have a mandate to:

• Enhance accountability by holding operators accountable for service quality and performance, leading to improved reliability and passenger satisfaction.
• Improve passenger experience by handling of complaints and providing clearer information. 
• Increase transparency by regularly reporting on service standards and publishing reports on poor performance
• Influence Policy and Decision-Making through its role as a statutory consultee responsible for advising on government and GBR policies, strategies, and plans and maintaining a focus on safeguarding passenger interests. 

Conclusions and questions

The proposed reforms have the potential to transform Britain’s rail network and put GBR in charge of unifying a fragmented rail industry and consolidating public and private entities under a single operating framework. While assuming and streamlining the collective responsibilities of the DfT, Network Rail, the RDG, and TOCs will be a politically and legally complex task, there is no doubt that this policy paper presents an ambitious roadmap to changing the way Britain’s rail is managed. 

Despite the government’s ambition, questions and concerns remain over the detail of certain proposals, as well as how their implementation will work in practice.

• Regarding freight, it is unclear whether GBR's statutory duty to promote rail freight can successfully be balanced with a commitment to improve passenger services and experience. 
• Regarding ROSCOs, it is unclear how GBR’s desire to maintain and renew rolling stock will affect procurement processes, stock standardisation, and technical innovation. 
• Regarding ticketing, while passengers may stand to benefit from a simplification of ticketing platforms, it remains to be seen whether the GBR’s proposed consolidation has a stifling effect on competition from third-party retailers. 
• Regarding the new passenger watchdog, it is unclear what mandate and powers it will be granted, and how its responsibilities will be carved out from the existing role of the ORR. Further, while the consultation emphasises the importance of avoiding duplication between the ORR and the new watchdog’s roles, how this will work in practice is yet to be determined. 

Get in touch

At Bird & Bird, we are enthusiastic about the reforms to the British rail system and are playing an active role in helping businesses prepare for the upcoming changes. 

For further advice on how your business is likely to be impacted, or for support preparing informed responses to the consultation, please contact Andrew Dean.