Future of Rail: Investment
Summary of discussions May 2025
RIA’s Future of Rail Investment event in May 2025 brought together over 100 participants from across the supply chain, public sector, investors and legal and financial experts. The wide-ranging discussion highlighted a number of important points, summarised in this note. RIA welcomes further discussion and contribution to the debate about how the rail sector needs to attract investment.
Please contact RIA Policy Executive Reuben Bull at reuben.bull@riagb.org.uk for more information.
Background
There are major investment needs to maintain, renew and upgrade transport infrastructure connections, but scarce public funding. This event will ask how the rail sector should approach this challenge, and what future investment models will need to look like, given rail reform, devolution and growing pressures from the wider fiscal position and climate resilience.
The Future of Rail: Investment event explored how rail can attract and retain greater private capital. Discussions focused on government funding constraints, making the most of current rail investment models, and what investors need to see to commit. Clear pipelines, devolution, blended finance, and streamlined delivery models were highlighted as essential topics to consider. A compelling strategic narrative and joined-up policy will be critical to unlocking rail’s full economic, social, and environmental value.
Key discussion points
• How should we prioritise rail investment needs, taking a long-term view?
• How could rail reform and GBR support the railway in securing sufficient investment?
• How could private investment structures help, for example, what is the future of PPPs and concessions for rail?
• How could we leverage a wide range of third party funding for rail schemes?
• What are the choices facing HM Treasury as it sets the long-term infrastructure strategy?
The context for rail investment
• Government’s top priority is economic growth, but it operates under tight fiscal conditions with both revenue and capital budgets being constrained. It is therefore essential that any rail investment proposal clearly articulates measurable returns or enables other growth drivers, such as housing or regeneration.
• With the transition to Great British Railways (GBR), and public ownership of train operating companies, there will be new opportunities and challenges. Positively, there is an opportunity from integrating revenue and cost management within a single public body, which can help reinforce the financial case for many investments. However, rail investment may increasingly be subject to the same funding constraints as – and direct competition with – other public services. If even more investment is classified as ‘on balance sheet’ there is a risk of crowding out the private investment that has underpinned rolling stock and infrastructure upgrades in the past.
• Government support for schemes is likely to be increasingly conditional: support will go to those who “do the homework” on funding, delivery, and policy alignment. Rail projects need to present robust business cases, credible delivery models, and diverse funding mechanisms. Rail projects must be affordable within the constraints of national and devolved government budgeting processes. There also needs to be a sound ‘retail offer’ to voters, to get political support and we need to be better at acknowledging and sharing successes.
• Regional benefits are increasingly central in demonstrating the value of, and political case for, rail schemes. The national debate about the value of rail is shifting to regional benefits. Smaller, regional projects - especially those that leverage land value capture, private finance, or deliver housing - are more attractive in today’s political and fiscal climate than large-scale megaprojects.
• Devolution: Long-term, place-based capital settlements for mayors and combined authorities will empower them to lead rail schemes – provided they have clarity on risk, funding tools like Tax Increment Financing, and strong local business cases. With devolved leadership, onward transport, using a range of modes, is now a central part of scheme design, requiring adequate funding and finance. Regional development funds will be increasingly important.
• The National Wealth Fund, with £27.8 billion to deploy, is positioned as a key coinvestor. Its mandate encompasses transport, clean energy, and capital-intensive infrastructure but it has made limited direct investments in rail to date. The rail sector now needs to bring forward demonstrator projects that can blend public and private capital.
Making the most of current rail investment models
• The UK already has successful private rail investment models, especially in rolling stock leasing, where over £25 billion has been invested during the privatisation period, with risks transferred to the supply chain. These models (different companies bring different approaches) offer valuable lessons for infrastructure investment. There were however concerns over added complexity as rail reform takes place, and efforts must be made not to over-control or specify markets that are delivering. For example, rolling stock leasing should not be undermined by unnecessary procurement or operating complexity.
• Open access was flagged as a source of investment that is under threat. Open access has historically attracted investment into successful passenger operations. Participants highlighted that uncertainty around GBR’s regulatory stance could limit competition and suppress innovative service offerings that depend on access stability and long-term risk frameworks. Maintaining effective, independent regulation is an important safeguard and can support continued innovation.
• Clear project definition is essential to secure investment. Private investors are keen to fund assets like stations, depots, and tunnels but only where assets are ringfenced and supported by long-term revenue streams, as in the Silvertown Tunnel or Northern Line Extension. There is strong appetite for investment in new infrastructure (e.g. battery charging points, electrification), but clarity on usage, repayment, and interfaces is crucial to attract capital.
• Modernised models for public-private partnership – distinct from older, rigid PFIs (Private Finance Initiatives) – could unlock new investment sources, provided they offer value reassessment and manage delivery risk better. For example, the Mutual Investment Model has been developed and used in Wales.
• Devolution is a solution for smaller, place-based projects, enabling local leadership and simplified governance. However, because the railway must operate as a national system, fragmentation risks (such as for freight and inter-city travel) must be mitigated by maintaining strong national coordination.
• Great British Railways will need to be an investor-friendly client and draw on today’s most successful approaches. The Office of Rail and Road (ORR) is currently reviewing the Investment Framework for third party investment into the Network Rail network and RIA members are feeding into this process, which will culminate in an ORR report to the Treasury. Participants noted that the current model could do more to enable investment: the ability to manage private capital interfaces and offer fixedprice contracts were noted as important factors in attracting third party investment. Reforming how NR or GBR engage with private capital and risk transfer is essential.
• There are a number of schemes that are close to ‘investor ready’ with Government endorsement. The RIA London & South Investment prospectus includes schemes in the region that may be able to secure private investment quickly, such as rail access to Heathrow (which may require a Government usage undertaking to proceed).
The investor perspective
• Clarity of process and clear government commitments are paramount to investment confidence. The UK risks losing investment to other countries if government rail strategy remains unclear and procurement processes are too slow or complex. UK rail must reduce bureaucratic complexity and demonstrate it can manage stakeholder alignment better if it wants to attract long-term private capital.
• Investors stressed the need for a long-term, visible pipeline of investible projects Investors need confidence that the UK has a coherent and deliverable rail investment strategy. Many current schemes are not structured in a way that matches the needs of institutional capital, which requires confidence in long-term returns. A national investment plan, similar to the former Strategic Rail Authority’s roadmap (and not an ad-hoc list of schemes), is urgently needed to align the public and private sectors on goals like growth, housing and decarbonisation, which provides clarity on the investments that will be supported by government.
• Government leadership and storytelling are crucial. Investors want to see champions behind projects, joined-up messaging, and reduced interface complexity, such as when working across Network Rail, multiple local authorities and regulators. A compelling narrative is also crucial. Investors are more likely to support projects that clearly articulate broader benefits jobs, homes, connectivity not just passenger numbers or mileage.
• Investors highlighted the importance of a single, slick “front door” into rail investment, which does not currently exist, with clearly assigned responsibilities across GBR, DfT, and local authorities. There are multiple parties involved, which creates complexity and therefore adds cost and deters investment. The number of interfaces must be minimised. Government’s primary role should be to coordinate, convene and enable, not deliver everything itself, but this will require significant commercial and financial leadership skills.
• Early engagement with investors and suppliers to design the right approach is critical. Private capital needs to shape the project model and assess risk-return profiles from the outset, not as an afterthought.
• Different types of investment models and investor appetites must be embraced, but then simplified into repeatable approaches. The rail ecosystem is huge with many different types of projects and assets (e.g. fixed vs mobile assets, large and small schemes; on or off the operational railway). We need to match the different investment needs with the right financial approaches. Investors range from low-risk lenders to equity investors seeking higher returns. Structuring projects to offer ‘layers’ of different levels of capital risk exposure is important to maximise investment. Investors like ‘platforms’ where an initial pilot approach can then be easily repeated across multiple projects – this helps justify the upfront effort in developing a viable approach.
• Concepts like Tax Increment Financing (TIF) and new variants such as “Resi-TIF” can unlock funding by tying future tax revenue to upfront borrowing. Projects like the Northern Line Extension show the value of leveraging tax receipts as part of infrastructure funding.
• Investment models must go beyond rail: given the importance of place-based and regional development strategies, we should think more in terms of investment zones where rail plays a key enabling role. This means bringing together economic regeneration; tax incentives and revenues; land assembly and clear and decisive leadership for ‘master-planning’ around stations and freight terminals. Internationally, other countries have clearer leadership structures to coordinate different parts of the public sector.
Throughout the 200th anniversary year of rail, RIA will be running a series of events delving into different areas of rail, asking what the future needs to look like, and how we can all help to shape it.
To find out more or register, scan the QR code or visit www.riagb.org.uk
