Railtrack was a group of companies that owned the track, signalling,
tunnels, bridges, level crossings and all but a handful of the
stations of the British railway system from 1994 until 2002. It was
created as part of the privatisation of British Rail, listed on the
London Stock Exchange, and was a constituent of the FTSE 100 Index. In
2002, after experiencing major financial difficulty, most of
Railtrack's operations were transferred to the state-controlled
non-profit company Network Rail. The remainder of
renamed RT Group plc and eventually dissolved on 22 June 2010.
1.3 Transfer of assets to Network Rail
2.2 Payments to shareholders
4 See also
6 External links
Railtrack permanent way maintenance train
Founded under Conservative legislation that privatised the railways,
Railtrack took control of the railway infrastructure on 1 April 1994
and was floated on the Stock Exchange in May 1996. Robert Horton
was first chairman, leading the organisation through the early years
of its existence up to 1999, including an industrial dispute from June
to September 1994.
The fatal accidents at Southall in 1997 and Ladbroke Grove in
1999 called into question the effect that the fragmentation of the
railway network had had on both safety and maintenance procedures.
In February 1999 the company launched a bond issue which caused a
significant fall in Railtrack's share price.
Railtrack was severely criticised for both its performance in
improving the railway infrastructure and for its safety record.
Between its creation and late 1998, the company had a relatively calm
relationship with its first economic regulator, John Swift QC, whose
strategy was to encourage
Railtrack to make commitments to
improvement. But critics said that the regulator was not tough
enough and that the company had, as a result, been able to abuse its
monopoly position. In particular, its customers, the passenger and
freight train operators, were desperate for regulatory action to force
the company to improve its stewardship of the network and its
performance. Swift had been appointed rail regulator in 1993 by the
then Conservative transport secretary John MacGregor MP. When the
Labour government took over after the general election in May 1997,
the new transport secretary (and deputy prime minister) John Prescott
took a much harder line. When Swift's five-year term of office expired
on 30 November 1998, he was not reappointed. After an interim
holding period, during which Chris Bolt, Swift's chief economic
adviser and effective deputy, filled the regulator's position, in July
1999 a new rail regulator began a five-year term, and a new, much
tougher regulatory era began.
The new rail regulator,
Tom Winsor (later Sir Thomas Winsor), had been
Swift's general counsel (1993–95), and adopted a more
interventionist and aggressive regulatory approach. At times the
relationship was stormy, with
Railtrack resisting pressure to improve
its performance. In April 2000 it was reported in the Guardian that
Railtrack is adopting a deliberate 'culture of defiance' against the
rail regulator". Gerald Corbett, Railtrack's chief executive at
the time, and Winsor clearly saw things very differently from each
Railtrack resisted regulatory action to improve its
performance, and as the regulator probed ever more deeply, serious
shortcomings in the company's stewardship of the network were
It was the Hatfield crash on 17 October 2000 that proved to be the
defining moment in Railtrack's collapse. The subsequent major
repairs undertaken across the whole British rail network are estimated
to have cost in the order of £580 million. According to Christian
Wolmar, author of On the Wrong Line, the
Railtrack board panicked in
the wake of Hatfield. Because most of the engineering skill of
British Rail had been sold off into the maintenance and renewal
Railtrack had no idea how many Hatfields were waiting to
happen, nor did they have any way of assessing the consequence of the
speed restrictions they were ordering – restrictions that brought
the railway network to all but a standstill.
Regulatory and customer pressure had been increasing, and the
company's share price began to fall sharply as it became apparent that
there were serious shortcomings in the company's ability to tackle and
solve its greatest problems.
Photograph of a sign identifying a bridge maintained by Railtrack
Meanwhile, the costs of modernising the
West Coast Main Line
West Coast Main Line were
spiralling. In 2001,
Railtrack announced that, despite making a
pre-tax profits before exceptional expenses of £199m, the £733m of
costs and compensation paid out over the Hatfield crash plunged
Railtrack from profit to a loss of £534m. This caused it to
approach the government for funding, which it then controversially
used to pay a £137m dividend to its shareholders in May 2001.
Railtrack plc was placed into railway administration under the
Railways Act 1993 on 7 October 2001, following an application to the
High Court by the then Transport Secretary, Stephen Byers. This
was effectively a form of bankruptcy protection that allowed the
railway network to continue operating despite the financial problems
of the operator. The parent company,
Railtrack Group plc, was not put
into administration and continued operating its other subsidiaries,
which included property and telecommunications interests.
For most of the year in administration, the government's position had
been that the new company would have to live within the existing
regulatory settlement (£14.8 billion for the five years 2001–2006).
However, it soon became obvious that that was impossible, and that the
aftermath of the Hatfield crash had revealed that the network required
significantly more money for its operation, maintenance and renewal.
It was reported on 23 November 2001, that a further £3.5 billion may
be needed to keep the national railway network running, a sum disputed
by Ernst & Young, the administrators.
Railtrack out of administration, the government had to go back
to the High Court and present evidence that the company was no longer
insolvent. The principal reason given by the government to the court
for this assertion was the decision of the rail regulator –
announced on 22 September 2002 – to carry out an interim review of
the company's finances, with the potential to advance significant
additional sums to the company. The High Court accepted that the
company was not therefore insolvent, and the railway administration
order was discharged on 2 October 2002.
Transfer of assets to Network Rail
Network Rail was formed with the principal purpose of acquiring and
Railtrack plc. Originally the Government allowed private
companies to bid for
Railtrack plc. However, with limited availability
of financial data on Railtrack, the political implications of owning
the company and the very obvious preference of the government that the
national railway network should go to Network Rail, no bidders apart
Network Rail were forthcoming, and
Network Rail bought Railtrack
plc on 3 October 2002.
Railtrack plc was subsequently renamed to
Network Rail's acquisition of
Railtrack plc was welcomed at the time
by groups that represented British train passengers. The attitude of
Railtrack's customers – the passenger- and freight-train operators
– was much more cautious, especially as they were wary of a
corporate structure under which shareholders' equity was not at risk
if the company's new management mis-managed its affairs.
Railtrack's parent company,
Railtrack Group, was placed into members'
voluntary liquidation as RT Group on 18 October 2002. The
Railtrack business (and its £7 billion debt) had been sold to Network
Rail for £500 million, and the various diversified businesses it had
created to seek to protect itself from the loss-making business of
running a railway were disposed of to various buyers. £370
million held by
Railtrack Group was frozen at the time the company
went into administration and was earmarked to pay Railtrack
shareholders an estimated 70p a share in compensation. The Group's
interest in the partially built High Speed 1 line was also sold
Railtrack shareholders formed two groups to press for increased
compensation. A lawyer speaking for one of those groups remarked
GMTV that his strategy was to sue the government for incorrect and
misleading information given at the time
Railtrack was created, when
John Major was Conservative Prime Minister. An increased offer of up
to 262p per share was enough to convince the larger shareholder group,
Railtrack Action Group, to abandon legal action. The Chairman,
Usman Mahmud, believed that legal action would not be successful
without the support of management and major shareholders.
The legality of the decision to put
Railtrack into railway
administration was challenged by the smaller
Shareholders Action Group. Their action against the government alleged
Secretary of State for Transport
Secretary of State for Transport at the time – Stephen
Byers MP – had, by deciding to cut off funding for
asking the High Court to put the company into railway administration,
committed the common law tort of misfeasance in public office. It
is believed that there was £532 million available to Railtrack
comprising £370 million in the bank and £162 million of an
existing Department of Transport loan facility still available to be
drawn down, but
Stephen Byers MP cancelled this facility, causing
shareholders to believe that he had broken the loan agreement.
This was the largest class action ever conducted in the English courts
– there were 49,500 claimants, all small shareholders in Railtrack.
Keith Rowley, QC, the barrister for the shareholders, alleged Byers
had "devised a scheme by which he intended to injure the shareholders
Railtrack Group by impairing the value of their interests in that
company without paying compensation and without the approval of
The case was heard in the High Court in
London in July 2005; some
embarrassment was caused to Byers when he admitted that an answer he
had given to a House of Commons Select Committee was inaccurate, but
on 14 October 2005 the judge found that there was no evidence that
Byers had committed the tort of misfeasance in public office.
The private shareholders decided not to appeal against the judgment,
because there were no legal grounds for doing so. For many of them –
who had contributed around £50 each, on average, to the fighting fund
to bring the action – the case had served its purpose.
The circumstances in which
Railtrack had been put into administration
were highly controversial, with allegations in Parliament on 24
October 2005 that the company had not been insolvent at the time (7
October 2001) and therefore that the administration order had been
wrongly obtained. This was because of the jurisdiction of the
independent rail regulator – at the time
Tom Winsor – to provide
additional money to maintain the company's financial position. Sir
Alan Duncan MP, then the shadow transport secretary, said in
Parliament that this aspect of the affair – which was not dealt with
in the shareholders' case in the High Court – was "perhaps the most
shameful scar on the Government's honesty" and "an absolute
Byers apologised in the House of Commons on 17 October 2005 for having
given a "factually inaccurate" reply to the Select Committee but said
that he had not intended to mislead them. This personal statement
to Parliament was not accepted by the MP who had asked the original
question, and the matter was remitted to the House of Commons
Standards and Privileges Committee for investigation. As a result of
that committee's report, Mr Byers made another statement of apology to
Payments to shareholders
Bridge station with typical station track in 1999.
RT Group plc (in voluntary liquidation) made a number of payments to
shareholders during the winding up of the company's affairs before
finally being dissolved on 22 June 2010.
Gerald Corbett was the company's
Chief Executive from 1997 until his
resignation in November 2000. He was succeeded by Steve Marshall,
who announced his own resignation in October 2001 and actually stood
down in March 2002.
Geoffrey Howe was appointed Chairman of
Railtrack Group (the part of
the business not in administration) in March 2002.
History of rail transport in Great Britain 1995 to date
Impact of the privatisation of British Rail
Tom Winsor §
Rail Regulator 1999-2004
^ "Britain Puts Price On
Railtrack Shares". The New York Times.
1996-05-02. Retrieved 2012-01-12.
^ Harper, Keith (1999-02-27). "Horton quits Railtrack". The Guardian.
^ Six dead in Southall Train Disaster BBC News 19 September 1997
^ Ladbroke Grove Crash BBC News 11 October 1999
^ £400m issue derails
Railtrack share price Independent, 18 February
Railtrack to give further commitments Archived 2008-09-06 at the
Wayback Machine. Office of Rail Regulation, 16 July 1998
Rail Regulator to go BBC News, 21 September 1998
^ City lawyer will be the new rail regulator[permanent dead link]
Independent, 24 March 1999
^ Get-tough regulator named for Railways Guardian, 24 March 1999
Railtrack Declares War on Regulator Guardian, 3 April 2000
^ Prescott orders probe into rail repairs Independent, 24 October 2000
^ Four dead in Hatfield Train Crash BBC News, 17 October 2000
^ Wolmar, Christian, On the Wrong Line, Aurum Press, 2005.
Railtrack shuts down
West Coast Main Line
West Coast Main Line BBC News, 25 October 2000
Railtrack drops out of FTSE 100 as shares fall 17% on brokers'
note[permanent dead link] Independent, 6 June 2001
^ Repair costs spiral to £5bn BBC News, 15 December 1999
^ Leathley, Arthur (25 May 2001). "
Railtrack in line for all-clear on
borrowing". The Times.
Railtrack shares dive to all time low Telegraph, 6 June 2001
Railtrack goes bankrupt with debts of £3.3bn Independent, 8 October
^ Blair told: find £3.5bn or the railways collapse Guardian, 24
^ Windsor's pointer to rail billions Telegraph, 25 September 2002
Network Rail closer to
Railtrack takeover BBC News, 18 September
^ "Accounting for Producer Needs: The case of Britain's rail
infrastructure" (PDF). Centre for Management and Organisational
History. p. 18. Archived from the original (PDF) on 4 March 2016.
Retrieved 12 October 2015.
^ Think tank lays into
Network Rail structure Guardian, 16 September
^ Liquidation RT Group
^ a b
Railtrack suggests bigger payout BBC News, 20 September 2002
^ Student sets up action group to lobby for 360p Telegraph, 16 October
^ a b Rail War Chest BBC News, 4 November 2002
^ HSBC sued over freeze on £370m in account Independent, 9 October
Railtrack attack on Byers Scotsman, 15 November 2001
^ Byers to answer charge that he misled Railtrack's shareholders
Telegraph, 25 June 2005
^ Defeat for
Railtrack shareholders BBC News, 14 October 2005
^ RPSAG: Appeal Decision[permanent dead link] RPSAG, 21 October 2005
^ Hansard Debates Archived 2011-06-05 at the Wayback Machine. The
Stationery Office, 24 October 2005
^ Byers denies lying over
Railtrack BBC News, 17 October 2005
^ Byers told to apologise over
Railtrack Guardian, 31 January 2006
^ RT Group homepage RT Group plc homepage Archived 16 July 2012 at the
^ New Year cash back for rail investors BBC News, 13 December 2002
Railtrack chief quits". BBC. 17 November 2000. Retrieved 16 October
Railtrack chairman stands down". The Telegraph. 5 March 2002.
Retrieved 16 October 2017.
^ "Railtrack's lawman rides into town". The Telegraph. 10 March 2002.
Retrieved 16 October 2017.
RT Group Official site
Railtrack Action Group Homepage
Christian Wolmar, The Guardian, 16 July 2005, "Forget Byers: the
scandal was in the original sell-off:
Railtrack was heading for
disaster long before the Hatfield crash"
BBC news report on
Railtrack compensation, December 2002
Text of a 1999 speech by Gerald Corbett
BBC article on Corbett's role with Railtrack
Guardian, 15 October 2005, "
Railtrack shareholders lose court battle
Why Rails Crack, the likely cause of the Hatfield crash