Northern Rail puts profits up by 34 per cent

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Northern Rail, which this week introduced inflation-busting fare rises for passengers, saw annual profits surge by 34 per cent last year, most recent accounts reveal.

The train operator’s holding company recorded a pre-tax profit of £40.1m in the year ending January 2011, up from £29.9m the previous period. Turnover fell by seven per cent at £571.9m over the same period.

The company receives the majority of its revenue from the taxpayer, via a £339m grant from the Department for Transport, with the rest from passenger income, which rose by 4.5 per cent during the year.

Despite the reliance on public subsidies, a spokeswoman for Northern Rail would not disclose how much the company is paying its directors nor would she respond to questions about the £22.5m paid in dividends.

The company is a joint venture owned by Serco and Abellio, the UK arm of Dutch national rail operator Nederlandse Spoorwegen.

Asked about Northern Rail’s financial performance since January 2011, the spokeswoman said: “As you will appreciate, our financial information is of a commercially sensitive nature and therefore we are unable to elaborate on the extensive information already in the public domain.”

She highlighted the company’s “continued financial commitment to the Northern franchise”, which she said includes non-contractual investment of £30m in station and rolling stock refurbishments, 104 extra carriages, 90 ticket vending machines and the continued employment of 4,800 people.

The most recent accounts show capital investment of £2.1m for the year ending January 2011.

Business leaders in Yorkshire yesterday called for more investment to help the private sector.

Margaret Wood, chairwoman of the Yorkshire Institute of Directors, said: “Business and passengers are being let down by outdated rolling stock and a sometimes second-rate service.

“There has been reinvestment in the infrastructure but there needs to be more to help business in Yorkshire take advantage of any opportunity that presents itself.”

Richard Tuplin, chairman of the East Yorkshire and the Humber IoD, warned Northern Rail against “losing sight of the fact that essentially it provides a public service that other private enterprises rely on to keep their businesses moving”.

He added: “In times of recession such as these it is incumbent upon these organisations to ensure they deliver best value for money to passengers and businesses by guaranteeing reinvestment in infrastructure, rolling stock and passenger services before delivering such a return to shareholders.”

Charlotte Britton, chair of the West Yorkshire IoD, said: “It can’t be profit at whatever costs and the balance between keeping the shareholders versus passengers satisfied is difficult but needs addressing.

“Reinvesting a proportion of the profit back into the rail infrastructure would be the right thing to do.”

The last Government’s “steady state” terms for the original franchise – which started in 2004 and has been extended to 2013 – mean that Northern Rail has no contractual obligation to run additional services.

But passenger numbers have increased from 60 million to nearly 90 million a year since 2004.

Richard Hebditch, a director at the Campaign for Better Transport lobby group, said: “The Government often hides behind the rail companies on fare rises and on the service levels that passengers receive.

“But Ministers set the level of price rises for most fares and set what services actually get provided through the franchise letting process.

“It’s ultimately up to the Government to make sure that travelling by rail is affordable, reliable and convenient.”

Local authorities and passenger transport executives in the North are in talks with the Department for Transport about how future franchises could be devolved to local control to give more say on when, where and how trains should be run.

The Northern Rail spokeswoman said: “We would not comment on future franchise agendas with local authority involvement in the re-letting of the Northern franchise.”