(qlmbusinessnews.com Mon, 19th Feb, 2024) London, UK —
“UK Railway Dividend Debate: Rolling Stock Firms' £400m Profits Under Scrutiny”
Private companies leasing trains for the UK railway have witnessed a threefold increase in profits within a year, distributing over £400 million in dividends, as per official data.
Rolling stock companies, known as Roscos, paid out a total of £409.7 million to shareholders, and profit margins surged to 41.6% in the fiscal year 2022-23, reported the Office of Rail and Road (ORR). This occurred while the broader railway sector faced significant cuts, and salaries were frozen, with taxpayer subsidies remaining double the pre-pandemic levels.
Trade unions have called for a windfall tax on these substantial dividends, labeling the financing of trains as a “racket” without risk for leasing firms.
ORR's financial analysis revealed that although the total leasing costs for train operators slightly decreased to £3.1 billion last year, it was still nearly 30% higher than five years ago. This happened while overall rail industry staff costs remained static.
The three primary rolling stock companies—Eversholt, Porterbrook, and Angel Trains—paid dividends of £409.7 million in 2022-23, up from £122.3 million the previous year. Their net profit margins surged from 14.3% to 41.6%.
These companies, created during the privatization of British Rail trains, have paid cumulative dividends of around £2 billion in the last decade. The highest-paid directors earn almost twice as much as the chief executive of Network Rail.
Unions argue that these firms take significant profits without contributing to building or commissioning trains. Mick Lynch, RMT union's general secretary, described the structure of rolling stock leasing as a “racket” that generates massive dividends and profits without risk.
Labour, if elected, plans to bring train operating companies into public ownership as contracts expire. There is growing support for a windfall tax on these rolling stock companies to reclaim some of the public money.
Most rail fares in England are set to rise by 4.9% next month.
While some within the rail industry support Roscos, there are calls for greater scrutiny and a potential windfall tax to ensure fairness and accountability.
A Department for Transport spokesperson defended the financial model, stating that rolling stock companies take on financial risk, enhancing the quality of trains and freeing up billions for investment in other sectors.
Porterbrook and Angel Trains spokespeople emphasized their significant investments in the rail network and innovative projects, arguing that dividends were paid in line with their shareholders' support and business operations.
The debate continues about the role of these rolling stock companies and their impact on the broader rail industry and taxpayers.
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