European Rail Deregulation: Can we learn lessons from UK and Swedish Rail privatization?

• On the 1st of January 2010 the European Railway market was opened up to competition allowing open access, i.e. all railway operators can compete with one another on international routes. Private companies are now able to operate trains across borders and pick up passengers outside their home country. The new EU liberalization model is very similar to that introduced during the British Rail privatization and also to liberalize the Swedish Rail market; so is it fair to say that we could make predictions of the outcome of European Railway deregulation by using the cases of the UK and Sweden?

  British Rail privatization has been widely criticized; it did not show the improvements in punctuality and reliability that was hoped for and enhancements in customer service are questionable. You would think that train efficiency would improve due to the profit incentive but in Britain many of the passenger franchises hit financial trouble meaning they had no choice but to sign management contracts with the franchising authorities resulting in reduced incentive to innovate. The UK Rail franchising system is perhaps too complex and involves too many companies. Many sources believe that the privatization of the rail infrastructure management led to the deterioration of the track and was potentially the cause of a several fatal crashes. Sweden has taken a different approach to privatization but whether it is better or not is open to discussion.

  Sweden’s state railway was split into different independent companies, including passenger, maintenance and station services. The company BV is responsible for the track and SJ, for operating the trains. However this split in responsibility means that BV hasn’t always been responsive to the needs of SJ as they might not have the same priorities.  Rail liberalization in Sweden led to a dramatic decline of jobs in the rail industry sector with the total amount of employees being reduced by over a half between 2001 and 2004. It also caused differences between companies with regard to working conditions, retirement age and work organization.  

  Perhaps Europe should seek advice from further afield. Europe should take the Japanese model into consideration which is renowned for its efficiency and convenience. I am not surprised that it is said to be the only profitable rail network in the world!  

  It may take some time before we start to see the effects of European Rail privatization. Hopefully it will bring about more positive consequences such as competitive pricing for customers, more seats on more trains and a wider variety of rail products and services on board, than negative outcomes like a decrease in jobs and wages in the rail sector or the undermining the safety of the tracks. 

  

  5 Feb 2010

  Posted by: Aisling McGhee