What does the Network Rail ‘pause’ mean for business?

Jun 26, 2015
Author: Paul Wormald
Paul is a partner at our Doncaster office. Paul specialises in advising small businesses and businesses in the transport & logistics sector. Paul also specialises in providing cloud accounting services to our clients.
Rail update

What does the Network Rail ‘pause’ mean for business?

In 2013 a five-year plan was announced to electrify the route from London to Sheffield through the East Midlands.

Just weeks after the General Election, where there was a strong focus on the proposal of a Northern Powerhouse to boost economic growth in the North of England, the government has ‘paused’ promised upgrades to major rail lines in the Midlands and the North of England.

The  Secretary of State for Transport, Patrick McLoughlin, announced yesterday that the plans for the electrification project would be ‘paused’,  with rising costs and missed targets making the £38.5bn plan untenable. The Transport Secretary also blamed Network Rail, saying it should have foreseen that the changes would cost more.

What does the Network Rail ‘pause’ mean for Sheffield?

Peter Kennan, tax partner at Hawsons, who also Chairs Sheffield Chamber of Commerce Transport Forum, appeared on BBC and ITV news programmes last night to express the disappointment felt by Sheffield City Region businesses at yesterday’s announcement.

Peter said: “A ‘pause’ was the announcement, but the issue is how long is that pause and could the whole electrification project be kicked into the long grass as too costly and difficult to achieve in a time where Network Rail has to rein in and get better control of its finances.  Worse still, could the electrification from London to Sheffield be extended but finish short of Sheffield, leaving the city region at a competitive disadvantage? Budget cuts could always ultimately lead to that conclusion.”

“Businesses in Sheffield City Region deserve better than this. Under-investment in the Northern cities has been endemic for decades and this latest setback is a major disappointment and points to a cooling of ambition to achieve a credible Northern Powerhouse.”

Peter Kennan ITV news

Source: ITV news

Watch Peter’s interview on ITV news

What does the Network Rail ‘pause’ mean for businesses across the North of England?

Paul Wormald, partner at Hawsons, and Transport & Logistics expert, said: “The announcement yesterday will undoubtedly have a damaging impact on the economy, and particularly on businesses throughout the rail sector. The impacts on the supply chain of many rail businesses are likely to be on budgets, cash flow forecasts, financing lines, capital expenditure plans and recruitment plans.”

“With growing pressures to maintain margins and mounting uncertainty surrounding paused infrastructure plans, businesses within the rail supply chain are going to find it increasingly difficult to budget and plan ahead. Any delay, or worse, a cancellation, of the proposed rail upgrades, is going to lead to increasing concerns in regards to inward investment and business confidence. The sector is being left in limbo.”

Commenting on what this pause may mean for the Northern Powerhouse, Paul said: “The rail network in areas of the North of England is out of date and in need of a major overhaul to boost the Northern economy. With concerns now growing over the integrity of the proposal of the Northern Powerhouse, following yesterday’s announcement, the next few months promises to be eventful for all involved in the sector.”

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Paul Wormald is a partner at Hawsons, working in the Doncaster office. He worked previously with two national firms of Chartered Accountants prior to joining Hawsons in 2001. For more information or advice on anything covered in this article, please contact Paul on pw@hawsons.co.uk or 01302 367 262.[/author_info]