Report expresses concern at rising train operator labour costs

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Report expresses concern at rising train operator labour costs

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ew analysis of train operator accounts show that unit labour costs have consistently risen by more than inflation and faster than other industries. Unit labour costs at the privatised companies have risen by 137% since 1997, and by 53% since 2005, a new report finds. After allowing for inflation, this means real term rises of 43% and almost 14% respectively.

The 132-page report, Rail Industry Performance 2016, has been published by TAS Publications, which has been analysing bus and rail company performance for over 20 years. The rise in costs has been driven by both wage rises and increased employer pension contributions, says TAS.

Analysis of labour cost components since 2005 shows that wages/salaries per person have risen by 15.5% in real terms, compared with 11% in the wider transport industry and a fall of 9% in the economy as a whole. On top of this, the cost of pension contributions has risen from £108m in 2005 to over £272m in 2014/15. After adjusting for inflation, this is a rise of almost 70%.

The report’s author Chris Cheek said that there must be concern that such rises would prove unsustainable if they continued. “With real wages across the economy as a whole still below pre-recession levels, commuters will resent paying ever-rising rail fares just to fund higher pay for train operating staff.”

The report notes that train operating company profits rose in cash terms in 2014/15, though operating margins, at 2.5%, remain low compared with pre-recession levels. It notes that margins in 2013 and 2014 were below the previous low point in 2001, in the aftermath of the Hatfield crash, before recovering to their present levels. Three regional franchises made the highest profits, with Merseyrail Electrics on 10.4%, Arriva Trains Wales on 8.4% and First/Keolis TransPennine Express on 7.5%.

The analysis covers all the TOCs lodging accounts with financial year ends between 31 December 2014 and 30 June 2015. Looking at other aspects of costs, the report notes that premiums payable to government reached a total of just over £2 billion last year, compared with just £3m in 1997.

The cost of leasing Britain’s 12,500 strong fleet of railway carriages has risen by 14% above inflation since 1997, reaching a total of £1.6 billion last year. However, rising demand has led to an expansion of the fleet by more than 30%, so that the cost per passenger vehicle has actually fallen by almost 9% to £127,000 per year.

 

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