Punctuality and reliability are at their lowest levels since 2014, the Office of Rail and Road said, with the botched introduction of new timetables in May among the causes.
The watchdog’s chief executive, John Larkinson, said: “The evidence we have collected suggests to us that Network Rail is failing to take all reasonable steps to effectively manage performance and recover from incidents on its network.”
He issued a Provisional Order which requires Network Rail to engage with train operators to improve performance, and to deliver a report by February 15 containing plans to resolve “underlying issues”. If it fails to comply, it could be fined and be made liable to legal action “from an aggrieved party”.
Andrew Haines, chief executive of the Government-owned operator, admitted train performance “has not been what our passengers deserve”.
He said: “We have let them down and we take responsibility for the part we have played.”
But as he spoke, his predecessor, Mark Carne, was being presented with a CBE at Buckingham Palace “for services to the rail industry”.
The Department for Transport admitted the timing was “unfortunate”, and the Labour MP Lisa Nandy called for it to be withdrawn.
The honour was announced in June, after the timetable chaos began and shortly before Mr Carne stepped down, following nearly five years in charge.
Manuel Cortes of the TSSA union likened it to “rewarding the captain of the Titanic for jumping ship”.
Mr Carne declined to talk to reporters outside the Palace.
Meanwhile, the RMT union has offered to suspend a long-running series of strikes which have crippled services on Northern Rail, if the company offers “crucial guarantees” to retain a second person on its trains.
Strikes are currently scheduled on every Saturday for the rest of the year.
RMT’s executive said it “would welcome talks commencing as soon as possible” and did not specify in its statement that the second person should be a guard – whose roles have been at the centre of the dispute – but only that they “retain a direct role at the platform and train despatch”.
The Government said it was already committed to a second person on Northern trains, “focused on looking after passenger needs”.