29 June 2016

UK Rail has for a long time led Europe (and in some respects the world) in opening its rail market and moving away from its former national rail operator. In spite of a number of setbacks since privatisation, it has become Europe's fastest growing and safest railway open to participants from Europe and the rest of the world (including, amongst others, Dutch, German, French, Spanish, Japanese, Italian and Hong Kong organisations). 

Will leaving the EU affect UK Rail?

Depending upon the final shape of any deal done as part of Brexit, UK Rail may now (slowly) move on from the European regulatory and financial structures over coming years. However, while the UK may cease to be a member of the EU, it is unlikely to depart entirely from European standards and norms - not least because many of them are based upon or reflect the UK system put in place prior to most of Europe's specific Rail regulation.

At this stage, no-one knows what Brexit will involve for the UK, the EU or more specifically any particular industry. Nor indeed do we yet know the realistic timescales in which separation will occur or how far it will go. However, it may be fair to guess that the current European railway directives (including the new Fourth Package of EU Directives which the UK may or may not ultimately implement) will at some point cease to apply directly to the UK. It may also be fair to assume that investment will continue to be dependent upon UK government policy and, as far as the private sector is concerned, the balance between risk and returns offered via the opportunities presented through implementation of those policies. As always, economic and political stability will play a part in determining the attractiveness of these opportunities to the private sector.

Areas where there may be some change or development

At the heart of a future UK railway structure may be the question of local or wider vertical separation or integration. While the latest European legislation is not particularly restrictive in terms of vertical integration, the future focus is likely to reflect European policy initiatives around the nationalised operators which continue to exist in the EU. Having completed the exercise of separating the former national operator the UK may be able to move on to revisit some form of closer working or integration between operator and infrastructure manager where the circumstances demand.

Similarly, there may be new options to look more closely at franchising and investment in the industry with an evolved form of procurement law no longer dependent on the EU models which are focussed, in part, on achieving fairness in circumstances where an incumbent national operator remains dominant in the member state. Assuming that a strong trade deal does emerge between the EU and UK, the industry may find that continued trade and involvement of strong European participants in the UK market will require the UK and EU to agree to abide by similar standards. In this respect EU law may continue in effect to be relevant to UK practices.

Track and access charging may also be revisited. There is due to be a review of track charges in 2017, in which the structure of charges for franchised, freight and open access operators are likely to be reviewed. Outside the strict charging requirements of EU regulation, it is possible that there may be more flexibility to find solutions for different market segments whilst still funding the infrastructure manager(s) fairly. In particular, freight, which may experience increasing economic headwinds as the impacts of Brexit are felt across the economy, may make a case for changes in track charging.

Interoperability (the requirement to apply consistent technical standards across different member states to allow similar operating conditions and support the 'grey market' in cross border trade) might be revisited. In many respects a future trade deal between UK and EU might be expected to restrict deviations in standards applied and commercial interests may encourage UK businesses to seek common standards. However, local preferences and the potential for IP advantages in finding different solutions may give rise to some deviation in the UK where the age of the network has meant that its infrastructure is often not the same size and shape as EU equivalents.


No-one really knows what the impact of Brexit on the rail industry will be. Short term uncertainty is probable.  Investment decisions may need to be revisited; although we are not aware of any intentions to change any committed expenditure yet. There may be scope to change some aspects of the railway which might otherwise be constrained by European regulation which focusses on problems of large former nationalised operators and infrastructure managers making competition difficult for smaller competitors – a situation which no longer exist in the UK. However, wholesale change it seems unlikely.

Key contact

Chris Jackson

Chris Jackson Partner

  • Infrastructure
  • Procurement and State Aid
  • Transport

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