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The private sector will continue to play a major role in Britain’s state railways promised by Labor after they decided not to nationalize the companies that own the thousands of trains running on the network.

Rolling stock companies, or roscos, operate out of sight of passengers, but are the financial backbone of the rail industry and have spent the last 30 years buying passenger trains and leasing them to privatized rail operators.

Passenger rail companies spent £3.1bn (26 per cent of their total spend) on train leasing in the financial year ending March 2023, the latest year for which data is available from the industry regulator, the Office of Railways and Roads.

The donuts (including Angel Trains, Eversholt and Porterbrook) emerged from railway privatization in the 1990s, largely through a series of management buyouts, but have since been sold to investors including C.K. Hong Kong-based Hutchison, Allianz and Canada’s Public Sector Pension Investment. Board.

A significant number of trains in the UK are also funded through separate private finance initiative deals.

On Thursday, the Labor Party set out plans for what it called “the biggest reform”. . . in a generation” of the railways, focused on nationalizing all passenger train companies, in case of winning the next general elections.

This would see operators such as Avanti West Coast, Great Western Railway and Govia Thameslink join infrastructure manager Network Rail back in public hands.

Unions have called for the roscos to also be nationalised, calling them a burden on the railway and pointing out that they have paid £1.5bn in dividends to their owners since 2016.

But the Labor Party confirmed its plans to continue turning to the private sector to finance trains. Louise Haigh, Labour’s shadow transport secretary, said this demonstrated the party’s pragmatic approach to reforms. “We are not ideological about it, we encourage working with the private sector.”

Industry executives and analysts said nationalizing the roscos would have been a much more expensive and complex challenge than that of train operators. The Labor Party has said returning passenger rail services to public hands would be cost-neutral, only doing so when contracts expire or when a termination clause is triggered.

Mark Swindell, chief executive of Rosco Rock Rail, said the industry had poured billions of pounds of pension funds and money from other institutional investors into the rail industry.

He defended the level of profits obtained by the leasing companies as reasonable. “We’re not talking about private equity returns, we’re talking about steady returns that are proportional to the risks,” she said.

Roscos also brings international experience in train procurement and shifts the risk of purchasing assets with a useful life of 35 years from the public to the private sector, he added.

“Labour has done the sensible thing,” said Roger Ford, industry and technology editor at Modern Railways, a specialist railway publication, who advised on the privatization of the donuts in the mid-1990s as part of the wider sale of the railways. railways. by the conservative government of the time.

“The donuts have bought and financed new trains and invested billions of pounds. . . “If you nationalized them, you would be nationalizing trains that have already been purchased by the private sector,” he stated.

Aside from the initial costs of purchasing thousands of rail cars, the government would also have to finance future train orders.

The Railway Industry Association, which represents supply chain companies including rings, said companies had spent £20bn on new trains since 1995, saving the government upfront capital costs.

Ford estimated that building new trains in the UK would require £1.5bn of funding a year, which will continue to be funded by the private sector. “They do the capital spending for you. . . “If you didn’t have the donuts then the Treasury would have to provide the money to buy new trains,” he stated.

Mary Grant, chief executive of Porterbrook, said British rail required “substantial investment” over the next 30 years. “We welcome Labour’s commitment to harnessing private capital to help deliver its long-term strategy for rolling stock,” she said.

Malcolm Brown, chief executive of Angel Trains, said: “Our long-term role and commitment to driving improvements across the UK is vital to delivering a modern, future-proof transport system.”

But senior union figures said Labour’s decision to leave train ownership to the private sector meant there was still unfinished business in its battle to reverse 30 years of privatisation.

“This anouncement. . . It should be a first step towards fully integrating the entire railway into public ownership,” said Mick Lynch, general secretary of the RMT.

“It is time to create a railway fit for the 21st century that serves the public, not private parties and shareholders.”