Profits of UK’s train leasing firms triple as dividends soar

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Around £400m was paid in dividends in 2022-23, while the remaining railway faced cuts and salary freezes.
Around £400m was paid in dividends in 2022-23, while the remaining railway faced cuts and salary freezes.

Around £400m was paid in dividends in 2022-23, while the remaining railway faced cuts and salary freezes.

Private Train Leasing Firms’ Profits Soar

Private firms leasing out trains for Britain’s railway have experienced a significant surge in profits, with dividends exceeding £400 million in a single year, according to official figures released by the Office of Rail and Road (ORR). 

Profit margins for these companies reached 41.6% in the fiscal year 2022-23, drawing attention amidst austerity measures elsewhere in the rail industry.

Calls for Windfall Tax

Unions have called for a windfall tax on the substantial dividends paid out by these firms, labeling the financing arrangement as a “racket” devoid of risk for the leasing entities. 

As taxpayer subsidies continue at double pre-pandemic levels, concerns mount over the fairness and sustainability of the current system.

Steady Increase in Leasing Costs

While overall industry staff costs remained stagnant, the total leasing costs paid by train operators rose by almost 30% over the past five years, reaching £3.1 billion. 

Despite this, management contracts for train operating companies yield margins of only about 2%, leading to a significant financial burden borne by taxpayers.

Rising Dividends and Profit Margins

The ORR’s financial analysis reveals a substantial increase in dividends paid by rolling stock companies (Roscos), soaring from £122.3 million to £409.7 million within a year. 

Net profit margins surged from 14.3% to 41.6%, raising questions about the fairness of the current financial arrangement.

Government’s Role

Despite the challenges faced by the rail industry, particularly during the pandemic, the Department for Transport reportedly did not seek to renegotiate or reschedule lease payments to rolling stock companies. 

Read more: Finding high-interest savings accounts in UK amid steady inflation

The lack of intervention contrasts with demands for cost-saving measures from Network Rail and train operators.

Controversy Surrounding Rolling Stock Companies

Eversholt, Porterbrook, and Angel Trains, the three primary rolling stock companies, have been at the center of controversy since their creation during the privatization of British Rail trains. 

With cumulative dividends reaching approximately £2 billion in the last decade and executive salaries surpassing those of key industry figures, questions arise about equity and accountability within the sector.

Gary Monroe

Gary Monroe is a seasoned contributor to the Los Angeles Business Magazine, where he offers insightful analysis on local business trends and economic developments. With a focus on Los Angeles' dynamic commercial landscape, Gary's articles provide valuable perspectives for entrepreneurs and business professionals in the city.

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