1. INTRODUCTION
1.1. This paper provides the Railway Industry Association’s response to the questions raised in the Office for Rail and Road’s (ORR) call for evidence for their review of the Investment Framework. The response draws on a roundtable discussion with RIA members and the ORR and RIA’s Future of Rail: Investment conference, both held in May. It also draws on RIA’s 2024 Manifesto deep dive into leveraging private investment and 2023 report on the topic.
2. ABOUT RIA
2.1. The Railway Industry Association (RIA) champions a dynamic UK rail supply sector. We help to grow a sustainable, and high-performing railway as well as promoting UK rail expertise and products to international markets. RIA has over 400 companies in membership, which is active across the whole of railway supply, covering a diverse range of products and services and including both multi-national companies and SMEs (60% by number).
2.2. The rail industry is a foundation sector for the UK’s economy which supports sustainable investment and jobs in towns and communities across the UK. The sector contributes more than £41 billion in economic growth and £14 billion in tax revenue each year, as well as employing 640,000 people. It is also a vital industry for the UK’s economic recovery, supporting green investment and hobs in towns and communities across the UK; for every £1 spent in rail, £2.50 is generated in the wider economy.
3. HOW EFFECTIVE DO STAKEHOLDERS FIND THE CURRENT INVESTMENT FRAMEWORK?
3.1. Whilst the current Investment Framework (IF) seeks to be effective, it is not sufficient to enable, guide, or encourage private investment in UK rail infrastructure. The IF is, by design, primarily focused on contractual arrangements, but does not serve as a usable route map for potential investors in the rail network.
3.2. Rather than acting as a gateway into the rail sector, the IF functions is currently more of a back-end process document, outlining the rules for interfaces with Network Rail infrastructure. What is missing is a high-level policy rationale for private investment and a structured, accessible pathway for new entrants. The Government’s role should switch from that of a ‘gatekeeper’ to a ‘facilitator’ for private investment, providing investors and suppliers with a playbook and ongoing practical support that shows how and where private investment can and will be used in rail. There is little practical guidance on initiating or managing investments from concept to delivery.
3.3. For example, there is no clear mapping of how a third-party scheme is initiated, assessed, approved, or delivered. There are numerous agreements, including Investment Delivery Agreement (IDA), Asset Protection Agreement (APA), Basic Asset Protection Agreement (BAPA),1 that must be understood, but little explanation of the wider process in which they are applied. New entrants face a steep learning curve and risk abandoning projects early due to lack of visibility and clarity.
3.4. This problem is magnified for stakeholders outside the traditional rail industry such as local authorities, property developers, or non-rail infrastructure funders who may have capital to invest but lack the knowledge to navigate the process. Even experienced investors report that it is unclear whom they should engage with within Network Rail, ORR, Department for Transport (DfT) or HM Treasury (HMT), or in future Great British Railways (GBR). Regional Business Engagement Managers exist within Network Rail, but they often cannot direct stakeholders through the wider organisational landscape or broader institutional or policy landscape because this is not well defined.
3.5. The IF is, in its current form, too narrow in scope to unlock meaningful third-party investment. It does not reflect the full lifecycle of a rail investment project and fails to address the need for early engagement, structured risk-sharing, or blended funding approaches.
3.6. In this context, the Government should develop an overarching strategy for private investment in rail, providing clear and consistent messages. This strategy should identify the types of projects or circumstances in which private investment will be particularly favoured such as revenue-generating infrastructure, regional regeneration schemes, or off-balance-sheet delivery models. Clarity is essential to build investor confidence, support long-term planning, and ensure alignment across Government departments and agencies.
4. WHAT BARRIERS TO INVESTMENT EXIST?
4.1. A range of structural, procedural, and fiscal barriers hinder investment in UK rail infrastructure under the current system. These are outlined below.
4.2. Lack of visibility and pipeline certainty
• There is little in the way of a transparent or predictable pipeline of schemes that are suitable for third-party investment. Without visibility of viable, deliverable, opportunities, private capital cannot plan or commit resources. Investors need to see repeatable, scalable schemes that fit their risk-return profile.
• This absence of pipeline visibility makes UK rail less attractive relative to other sectors (e.g. clean energy, digital infrastructure) or geographies (e.g. continental Europe or the US). Institutional investors require a steady, long-term deal flow to justify the costs of market entry and internal capacity-building.
4.3. Institutional fragmentation and unclear entry points
• One of the most frequently cited barriers is the lack of a single, clear, and consistent “front door” to the rail investment process. Depending on the nature of the scheme, investors may need to engage with multiple bodies DfT, ORR, Network Rail, devolved authorities, local Government, and GBR in future.
• This fragmentation creates duplication, slows down timelines, and increases the cost of doing business. It is often unclear which organisation owns the decisionmaking authority or what timelines and criteria apply, leading to difficulty for investors. Even where roles exist (e.g. Network Rail’s Business Development Managers), the broader institutional support is not aligned to enable their success.
• To address these structural inefficiencies, the Government’s role needs to switch to become a facilitator, not a ‘gatekeeper’ as currently. This includes providing a
formal framework or governance structure that brings together the relevant stakeholders at the appropriate stages, to take coordinated decisions on project development and approval. A facilitative role would reduce institutional delays, clarify accountability, and improve confidence in delivery.
• RIA members have identified the need for intelligent market engagement a twoway dialogue where public sector clients share pipeline intentions, seek private sector insights early, and actively co-develop solutions.
4.4. On-balance-sheet constraints
• Many infrastructure schemes in rail are treated as on-balance-sheet investments, which means they are counted towards public debt. Historically any on-balance sheet classification has resulted in schemes not proceeding. The complexity of navigating balance sheet classification, and particularly that a decision often comes very late on in the process of developing a scheme, acts as a deterrent.
• The balance sheet treatment should not be the determinant of whether schemes proceed. A fair comparison of the pros and cons of using private finance should consider the need for effective risk transfer, commercial delivery discipline and scope for innovation against the cost of borrowing.
• Private finance can also be an important mechanism to smooth spending profiles over long periods of time, reducing the ‘boom and bust’ spending patterns that increase costs (as has been seen in UK rail electrification, for example, where UK costs were around one third higher than in Germany over a 30 year period where there was a much smoother profile).
• The decision to use private finance also needs to appraise the importance of bringing forward investment sooner than would be possible with public funds Effective management of long-lived infrastructure assets often requires timely intervention to avoid future cost escalation.
• The Mutual Investment Model (MIM) in Wales2 may provide a useful UK precedent for unlocking off-balance-sheet finance in infrastructure without sacrificing public control or value-for-money safeguards
4.5. Inappropriate or unclear risk allocation.
• Private capital requires well-structured, proportionate risk-sharing. In the current framework, investors face ambiguity in how risk is distributed between parties. In some cases, the Government retains disproportionate control without sharing risk; in others, inappropriate risks are transferred without sufficient oversight or clarity.
• Projects need clearly defined commercial structures that outline what risks are retained by Government, which are transferred, and how risks are mitigated particularly for planning, demand, construction cost overruns, and interface with the operational railway.
• The IF supports a technical allocation of risk but does not address the underlying principles of what risks Government wishes or does not wish to hold and for which types of assets.
4.6. A clear and simple route of recourse
• Investors need to know how contractual enforcement and regulatory oversight will give them contracts. In some areas, robust contracts may be sufficient. In rail, given the role of the operational network, a regulatory backstop is often essential to ensure fair treatment, particularly in disputes or long-duration projects.
• The role of the regulator and regulation in supporting project certainty should be clearly clarified in the IF. Some investors may rely more on robust contracts to manage performance and enforce obligations, while other stakeholders, including some investors, may favour a strong regulatory regime to ensure fairness and consistency in delivering projects. The strong presence of a regulator like ORR can help ensure fairness, for example through setting behavioural expectations, enforcing standards and providing recourse where contractual approaches are insufficient.
• Other regulators such as the Civil Aviation Authority (CAA) offer stronger, more transparent guidance for capital investment processes (e.g., Heathrow’s capital programme planning). The ORR could play a similar role in ensuring transparency, stakeholder alignment, and procedural consistency; however, this might require ORR to have a broader remit in facilitating private investment.
4.7. Absence for a process for unsolicited (market-led) proposals.
• Innovative, market-led investment proposals currently have no formal entry route. A previous market-led proposals initiative in 2018 did not result in any schemes carried forward by the DfT and subsequently dented market confidence. There are no protections for intellectual property (IP), and no guidelines on how unsolicited proposals are assessed, funded, or competitively tendered. This discourages creative solutions and suppresses innovation from the private sector.
5. HOW COULD THE FRAMEWORK BE IMPROVED TO BETTER SUPPORT INVESTMENT IN RAILWAY INFRASTRUCTURE?
5.1. The IF should be comprehensively restructured into a true investment facilitation tool. RIA has been calling for a Government playbook outlining how, where, and when private investment can be used in rail. A playbook could help both Government and the private sector to fully understand each other’s roles, and provide the certainty needed to invest. This playbook should take lessons from previous partnerships between the rail and property sectors to support its formation. The following are practical recommendations, drawing on stakeholder feedback.
5.2. Publish a clear, national pipeline of investible rail projects
• A Strategic Investment Plan should be developed by Government, endorsed at a national level, and updated regularly. This would provide visibility for investors, align public-private objectives (e.g. decarbonisation, housing and growth), and enable forward planning for industry.
• Such a pipeline should cover a mix of project types small regional upgrades, electrification, major enhancements and indicate which models, for example Public-Private Partnerships (PPP), Design, Build, Finance and Operate (DBFO), direct Government, are most suitable.
5.3. Create a single “investment front door”, with clear guidance.
• A central, accessible contact point should be established possibly within GBR or DfT that can guide investors through the process. This front door must be empowered to coordinate across public bodies, signpost regulatory obligations, and help triage proposals.
• Guidance should include flowcharts, timelines, and links to relevant documents (e.g. IDA/APA templates), and reflect real-world case studies to demystify the process. This would help potential investors in rail schemes to understand what needs to happen to obtain approval, moving the Government away from its current position of gatekeeper to that of a facilitator.
5.4. Develop and standardise delivery models
• The Government should publish model templates for funding and delivery: availability-based models, usage guarantees, revenue-sharing mechanisms, and risk transfer principles. These should be matched to project typologies commercial value schemes (e.g. freight, airport access) versus social value schemes (e.g. accessibility upgrades and rural services).
• This would reduce complexity, lower entry barriers, and support consistent investor expectations.
5.5. Enable modern PPPs and off-balance-sheet models
• Reforms should enable flexible partnership models that are not bound by outdated Private Finance Initiative (PFI) constraints. MIM-style contracts, for example, provide long-term certainty with private finance, while allowing Government to retain value-for-money tests and delivery oversight.
• Such models can be particularly effective where long-term revenue streams exist (e.g. stations, logistics hubs and digital upgrades). Additionally, Government appraisal methodologies must be modernised to explicitly and fairly compare the costs and benefits of private finance versus public borrowing. Current models often favour lowest-cost capital without adequately recognising the value of risk transfer, delivery efficiency, innovation potential, or lifecycle cost certainty provided by private partners.
• In parallel with publishing a national pipeline and standardising delivery models, the Government should bring forward more pathfinder and pilot projects. These early schemes serve as testbeds for new funding models, commercial structures, and cross-agency coordination. Accelerating such projects helps build institutional capability, provides a framework for scaling investment approaches, and reduces perceived risk by proving what works in the real world.
• A leading example is Heathrow Southern Rail Access a scheme that is already well-developed and could attract private finance with the right policy support. It represents a clear opportunity to demonstrate a successful private-investment model for rail infrastructure.
5.6. Provide early-stage commitment and risk-sharing mechanisms
• Government tools like Section 54 guarantees3 are proven enablers of private investment. Greater use of these tools alongside early-stage endorsement of projects can significantly improve investor confidence, reduce cost of capital, and encourage design innovation.
• Government can also provide development funding (e.g. grants for business case development), as is done in other sectors, to bring schemes to a bankable stage.
6.
WHAT OTHER RELEVANT FACTORS COULD ENCOURAGE INVESTMENT INTO RAILWAY INFRASTRUCUTURE?
6.1. Institutional leadership and clear narrative from Government.
• Rail needs clear political and policy leadership to build investor trust. That means champions in Government, joined-up messaging across departments, and a compelling narrative around the outcomes of investment growth, jobs, housing and decarbonisation.
• The narrative must shift from short-term cost minimisation to long-term value creation, particularly in regional economies. A clearly articulated Government strategy on private investment, with defined criteria for when and how it will be used, would serve as a marker for investor trust and institutional alignment. It is within this context that the Government must become a facilitator of private investment in the rail industry.
6.2. Devolution and place-based schemes.
• Mayors and Combined Authorities can lead rail investment, provided they have funding tools, for example, Tax Increment Financing (TIF) and Residential Tax Increment Financing (Resi-TIF), clarity on risk, and alignment with national strategy. Smaller regional schemes that integrate housing, regeneration, and sustainable transport are particularly suited to blended public-private models.
• This is also where land value capture, local taxation, and co-investment with the Government’s new National Wealth Fund (NWF) could be deployed effectively.
6.3. Investor flexibility and platform approaches.
• Different investors have different appetites from low-risk lenders to higher-risk equity partners. The IF should support flexibility, with modular structures that allow layering of capital and repeated application of successful pilots across regions or asset types (e.g. charging infrastructure and station redevelopment).
• These approaches mirror successful models in other infrastructure sectors and would reduce transaction costs for both Government and investors.
6.4. Innovation and integrated system thinking
• The IF could helpfully promote projects that integrate across the rail system track, signalling, electrification, digital control not just isolated components. It should support innovation, including new technologies, delivery mechanisms, and financing methods.
• The ability to innovate in both what is delivered and how it is financed is essential to modernising UK rail and competing globally for capital.
7. CONCLUSION
7.1. RIA welcomes the ORR’s timely review of the Investment Framework. The current document is a narrow guide to specific back end processes and needs to evolve into –or be situated within – a strategic, enabling framework that supports private capital at scale in the railway. Reform should centre around providing pipeline visibility, repeatable models, and institutional leadership, to provide a system that is clear and easy to navigate.
7.2. RIA stands ready to support ORR and HMT in shaping the next stage of this framework and ensuring that rail plays a central role in the UK’s infrastructure-led growth strategy.
7.3. For further information please contact RIA Policy Director Robert Cook at robert.cook@riagb.org.uk and 020 7201 0777 / 07951 776 874.
1 Network Rail, 2022. Guide to Template Agreements for Undertaking Railway Projects. https://www.networkrail.co.uk/wp-content/uploads/2022/01/Guide-to-Template-Agreements-forUndertaking-railway-projects.pdf
2 https://www.gov.wales/mutual-investment-model-infrastructure-investment
3 Section 54 guarantees, under the Railways Act 1993, ensure that rolling stock is re-leased from the end of its initial lease period, through to the expiry of the Section 54 undertaking, on substantially the same terms as the initial lease. These guarantees provide assurance from the DfT to ensure that a specific fleet of trains is used by a Train Operating Company (TOC) for a specific period.