Britain rescinds privatized rail upkeep

Accidents cause reversal of $2 billion contracts

October 25, 2003|By NEW YORK TIMES NEWS SERVICE

LONDON - Spurred by growing safety concerns, Britain's railway authorities reversed a crucial element of the nation's rail privatization yesterday, announcing that maintenance contracts awarded to seven private companies - worth $2 billion a year - would be taken over by the government-backed Network Rail.

The move was the most significant setback in a mostly successful series of privatizations in the 1980s and 1990s of businesses from telecommunications to utilities.

Shares of some of the maintenance companies fell by as much as a fifth, reflecting investor calculations that rail maintenance had provided those companies with badly needed revenue to offset a slowdown in construction and engineering.

The return to government control on maintenance of the 20,000-mile network followed a series of fatal train crashes, which raised concern that safety standards since privatization were being overlooked in the rush for profit. About 18,500 workers from the private maintenance groups will be absorbed by Network Rail.

Britain's creaky rail network, sold into private hands nine years ago, was initially run by a private company called Railtrack, which went bankrupt last year. The government was forced to transfer control of the rail network, signals and stations to Network Rail. After decades of under-investment, the poor state of the rail network was blamed for fatal train wrecks at Hatfield and Potters Bar north of London.

Under the rail privatization of the 1990s, the monolithic British Rail was broken up, with the tracks and stations, rolling stock and regional franchises all going to separate private owners. The system is overseen by the government's Strategic Rail Authority, which said yesterday that the latest move was "not a step toward re-nationalization" because private contractors would still handle track renewal and other work not related purely to maintenance.

Some of the companies to lose contracts said they had been unaware of Network Rail's plans. Ian McAllister, the Network Rail chairman, said the move was "the right thing to do" to increase the quality of maintenance and save about $340 million a year. Shares in one of the seven companies, the Peterhouse Group, fell by 25 percent while shares in another, Carillion, fell almost 16 percent.

The move could have repercussions beyond the national rail service. Three of the companies that lost rail-maintenance contracts - Jarvis, Amey and Balfour Beatty - also have separate 30-year maintenance contracts in a plan to improve London's subway system, known as the Tube.

Labor leaders representing 9,000 subway workers are already calling for strikes to protest poor maintenance after a series of recent derailments that disrupted subway services in central and north London. They now seem likely to turn their sights to the maintenance contractors.

Bob Crow, a labor leader representing subway workers, said, "It is now untenable that the same companies now being kicked out of maintenance contracts on the national railway network should be allowed to continue to profit from declining safety standards on the Tube."

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