Rail infrastructure: roundtable on station investment

The private roundtable included a varied audience: the Department for Transport, Network Rail, transport consultants, and law firms. The lively conversation looked at attracting investment, engaging stakeholders, reassuring the private sector, and alternative investment models. 

Attracting investment

Attendees shared views on actions and priorities for directing investment into station development, focusing on how we can make this a more attractive asset for investors and unblocking the barriers to increasing private investment.

Everyone agreed that despite the current economic challenges facing the railways and investment, stations remain critical as the entry point for passengers and acting as a hub to connect to other transport modes, and in some cases are destinations in themselves. The larger stations not only generate passenger revenue but have potential to drive economic growth.

With this in mind, enabling private sector investment has never been more important – this is highlighted by the recent focus on Euston upgrades and connecting to HS2.

We discussed the need for greater private sector investment to allow delivery of public sector schemes, maximising potential economic and financial returns. Participants acknowledged that while there's no lack of desire, there are substantial difficulties in progressing investment. Among them, the complex approvals process and the multiple organisations involved: from design, to application to approval for a proposed station. There's risk that the asset envisaged by investors is less attractive to them at the end of the approval process (while incurring substantial costs in scheme development).

When matched with uncertainty on ultimate cost, investors raise key questions which promotors are unable to answer. This is unsurprising given the complex, and at times ‘unsolvable’ environment that the industry has seemingly now created. 

With a complex stakeholder map and the need to deliver for the travelling public, having the right lead organisation on a project is key. This will differ by project and could be the local authority, Network Rail, or another third party.

Engaging stakeholders 

There was a desire from the attendees to see more soft market testing: to determine how to engage the private sector; work through how best to de-risk these investments; and make them an attractive proposition; and think innovatively about how such funding could be put in place.

Early stakeholder engagement was viewed as a key point to get support from the private sector. Having discussions with key parties, such as local communities and funders, from the outset, can address concerns to help alleviate difficulties that might arise. For example, the Clapham Junction development discussions started in 1962, but hasn't yet materialised as the vision presented didn't meet local community expectations.

There's also a recognised need to make sure there's clarity and sufficient support for any business case driving investment. To maintain investor confidence this should be in place and well thought through prior to investor discussions. This will help provide confidence in the project and the investment required.

Reassuring the private sector 

It was agreed that it was common to prioritise submitting applications for stations designed to be "flagship spectacles" rather than focusing on the core reasons for station development, ie, addressing connectivity across the regions. This would often result in the cost of the project exceeding the initial budget. 

If, instead, the focus was on delivering the "minimum viable product," then bespoke investments could be added to attract the private sector once there was certainty that the base development would happen. 

Prioritising the core proposal gives the private sector clarity over the core revenue streams which it can leverage against, rather than taking a high-risk view on a development that might not ever be approved or differ substantially from the original vision. 

There was also a discussion on scale. There's value in targeting the delivery of medium scale schemes, focusing less on the multi-billion pound schemes which present the highest risk.

Alternative investment models 

Other models of investment were discussed to help unlock station development. These models included matched funding from the private sector to invest into station facilities, such as toilets and shopping facilities. This would make passengers more likely to choose public transport over cars, by promoting a greater end-to-end journey experience or positioning stations as a destination in themselves.

Increasing the public use of the rail network would allow for greater returns to then be shared with the private sector, encouraging investment and accelerating their compliance with ESG requirements.

Finally, we discussed the aggregation of investment opportunities. This included a case study of Network Rail bundling leases together, which allowed station enhancements to be made at scale, where investment is required that focuses on the larger risk that an individual scheme poses to an investor. 

The outlook

This rich conversation highlighted that while challenges exist, there's plenty of enthusiasm for improving how we deliver station development. 

For more insight and guidance, get in touch with Wayne Butcher.