Page 1: Introduction
When an industry is owned by the government, it is a public corporation - more commonly known as a ‘nationalised industry’. In the 1940s, many industries, including the railway industry, were brought into the public sector where successive governments were able to control their policies and management practices. There has always been an ideological debate about the size of the public sector and the efficiency of nationalised industries when used as an instrument of central government policy. In 1979, the Conservative government pledged to return selected publicly-owned enterprises to the private sector. This process is known as ‘privatisation’.
The effects of privatisation were strategically significant for the chosen industries. For the first time in decades, organisations which had previously enjoyed monopoly control in the state sector would have to respond directly to customer needs, market forces and competitive pressures.
This case study examines the effects of privatisation on the core organisation in the UK railway industry - Railtrack. The 1993 Railways Act paved the way for rail privatisation which is in the process of rapidly reforming Britain's railways. The overriding aim of this privatisation was to improve the quality and efficiency of rail services by introducing private sector investment and management and therefore to encourage greater use of the railways. Privatisation was designed to deliver benefits for passengers and create opportunities for business.
Privatisation plans for the railway industry involved the creation of nearly 100 different business units, the most significant of which was Railtrack. Railtrack was released from the public sector when it was floated on the Stock Exchange to become a privately owned company, Railtrack Group PLC, in May 1996. Railtrack owns almost all of Britain’s railway infrastructure, including track, signalling, bridges, tunnels, stations and depots. Railtrack’s main operational activities include:
- selling train paths to train operators, managing the allocation of train paths, producing the working timetable
- operating the rail network, including signalling, providing electricity for traction to train operators
- operating 14 large mainline stations
- leasing stations and depots to the passenger train operating companies
- planning and executing major capital programmes of investment in the railway infrastructure
- managing its property portfolio
- managing safety across the network.