Metronet (British infrastructure company)

During the mid 1990s, the Conservative government conducted a deep exploration of various options for involving the private sector in the operations of the London Underground. These options included its complete privatisation, akin to that of British Rail. This option was publicly opposed by the Labour Party, who stated in their New Labour, New Life for Britain manifesto for the upcoming general election that the wholesale privatisation of the Underground was not the answer and proposed the use of a public-private partnership (PPP) arrangement instead.

Following the election, the new Labour government promptly began work on setting up PPPs, stating that this would address the perceived period of underinvestment in the Underground.{{Cite news |date = 16 December 2000 |title = New blow to Tube sell-off plan |language = en-GB |work = BBC News |url = http://news.bbc.co.uk/2/hi/uk_news/politics/1072193.stm |access-date = 7 March 2021}}{{Cite web |last = Butcher |first = Louise |date = 16 January 2012 |title = London Underground PPP: background |url = https://researchbriefings.files.parliament.uk/documents/SN01307/SN01307.pdf |access-date = 25 February 2024 |language = en-GB |publisher = House of Commons Library}} The selected model called for the operation of services on the Tube to remain in the hands of the public sector while the infrastructure (including the track, trains, tunnels, signals, and stations) would be leased to private firms for a 30 year period, during which they would enact various improvements. A public denial that the newly-formed railway infrastructure company Railtrack would be involved in the PPP was issued by the government after it was made clear that some parties would refuse to bid if it was. By the turn of the century, senior figures within the government was strongly advocating for the implementation of these PPPs.

Metronet was founded in 1999 as a consortium of companies to bid for PPP contracts.{{Cite web |date = October 2001 |title = House of Commons - Transport, Local Government and the Regions - Appendices to the Minutes of Evidence |url = https://publications.parliament.uk/pa/cm200102/cmselect/cmtlgr/387/387ap13.htm |access-date = 7 March 2021 |publisher = Parliament.uk}} The equal shareholders in the venture were Atkins, Balfour Beatty, Adtranz (later Bombardier Transportation), SEEBOARD (later EDF Energy), and Thames Water.

To pay for the works, each company provided £70{{nbsp}}million of equity; a further £2{{nbsp}}billion was raised using bank loans, and £600{{nbsp}}million from the European Investment Bank.{{Cite news |date = 4 April 2003 |title = Final stamp on Tube PPP deal |language = en-GB |publisher = BBC News |url = http://news.bbc.co.uk/2/hi/uk_news/england/2917859.stm |access-date = 7 March 2021}} The consortium awarded contracts to its own shareholders, for example rolling stock contracts were awarded to Bombardier Transportation. This closed shop supply chain approach was later criticised for causing high costs for the consortium.{{Cite news |last = Milmo |first = Dan |date = 28 May 2007 |title = London tube work - one firm on budget; the other £750m over |language = en-GB |work = The Guardian |url = https://www.theguardian.com/business/2007/may/28/transportintheuk.travel |issn = 0261-3077}}{{cite news |last = Webster |first = Ben |date = 14 April 2005 |title = Metronet behind schedule on all of its main Tube projects |work = The Times |location = London |url = https://www.thetimes.com/business-money/companies/article/metronet-behind-schedule-in-all-of-its-main-tube-projects-dbj728t3fr7}} {{subscription required}}

The bidding process was protracted by political factors, including public disagreements on the topic of PPPs between then-Mayor of London Ken Livingstone and Deputy Prime Minister John Prescott.{{Cite web |last = Baldock |first = Hannah |date = 9 February 2001 |title = Getting the Tube to work |url = https://www.building.co.uk/news/getting-the-tube-to-work/1003880.article |access-date = 7 March 2021 |website = Building |language = en-GB}} Furthermore, in the aftermath of the Hatfield rail crash, there was a climate of both public and political skepticism in the involvement of the private sector in transport infrastructure. During early 2001, Bob Kiley, the first commissioner of Transport for London (TfL) and an outspoken critic of the prospective PPPs, was put in charge of the process. Kiley was also empowered to revise the terms of the prospective contracts; he promptly produced updated briefs for the PPPs, a move which thus necessitated the submission of revised bids.

During May 2001, it was announced that both Metronet and Tube Lines had been selected as the preferred consortiums.{{Cite web |last = Kiley |first = Bob |date = 12 October 2001 |title = Bob Kiley: Trouble down the line |url = http://www.theguardian.com/society/2001/oct/12/ppp |access-date = 7 March 2021 |publisher = The Guardian |language = en-GB}}{{cite web |url = http://news.bbc.co.uk/news/vote2001/hi/english/main_issues/sections/facts/newsid_1304000/1304573.stm |title = The London Underground |publisher = BBC News |date = 3 May 2001}} Metronet emerged as the successful bidder for two 30-year contracts, covering various tube and sub-surface lines; specifically, the BCV (tube) lines contract involved the Bakerloo, Central, Victoria and Waterloo & City lines, while the SSL (sub-surface) lines contract covered Circle, District, East London, Hammersmith & City and Metropolitan lines.

Separately, Tube Lines was awarded the contract for the other London Underground lines{{snd}}Jubilee, Northern and Piccadilly. Both Metronet and Tube Lines were colloquially referred to as "infracos"; there was repeated speculation that the two companies planned to merge.{{cite web |url = https://www.building.co.uk/news/london-underground-rules-out-supercompany-merger/1027185.article |title = London Underground rules out 'supercompany' merger |first = Phil |last = Clark |website = building.co.uk |date = 11 April 2003}} Contracts valued at around £17{{nbsp}}billion over the 30-year period were issued, under which these companies received around £660{{nbsp}}million each month from the Government, although this amount was subject to reductions if targets are not met.{{Cite web |date = 17 November 2006 |title = Metronet shareholders face £750m bill for London Underground failures |url = http://www.theguardian.com/business/2006/nov/17/transportintheuk.travelnews |access-date = 7 March 2021 |publisher = The Guardian |language = en-GB}}

In April 2003, Metronet began to maintain, upgrade and renew London Underground infrastructure as the PPP came into force.

Under the terms of the PPP contracts, Metronet agreed to maintain London Underground infrastructure (track, trains, tunnels, signals, and stations) to the standards and performance levels set in the contract. Furthermore, Metronet committed to delivering substantial improvements to the network, by refurbishing, upgrading and renewing track, trains, tunnels, signals, and stations. To encourage high reliability, deductions suffered for poor performance were set at twice the rate of increase in revenue for improved performance.

At a cost of £7{{nbsp}}billion, Metronet promised substantial investment during the first 7.5{{nbsp}}years of the contract (2003 to 2010):

• 147 stations (including lifts and escalators) modernised or refurbished by 2012
• {{convert|127|mi}} of track renewed and 166 points/crossings replaced
• Upgrade and refurbishment of tunnels, bridges, embankments, track drainage and other civil structures
• Refurbishment of existing rolling stock, as well as making them more reliable
• 47 new trains with upgraded signalling on the Victoria line by 2012 (delivered as 2009 Stock)
• 190 new air conditioned trains for the District, Circle, Hammersmith & City and Metropolitan lines by 2015 (delivered as S Stock)
• 24 new Bakerloo line trains by 2019 (cancelled following the collapse of the PPP)

File:66712 Metronet Ipswich (cropped).JPG locomotives from GB Railfreight to help speed up track replacement works]]

In June 2004, the National Audit Office criticised the complexity of the PPP deals, noting they offered "the prospect, but not the certainty" of improvements.{{Cite web |date = June 2004 |title = London Underground PPP: Were they good deals? - National Audit Office (NAO) Report |url = https://www.nao.org.uk/report/london-underground-ppp-were-they-good-deals/ |access-date = 7 March 2021 |publisher = National Audit Office |language = en-GB}} In August 2004, Metronet was declared at fault by an accident investigators' report into a May 2004 derailment at White City, for failing to implement sufficient safety checks despite being ordered to do so by TfL.{{cite web |date = August 2004 |title = Formal Investigation into the derailment of a Central line train at White City on 11th May 2004 |url = http://www.metronetrail.com/webfiles/General/White_City_Derailment_Final_Report.pdf |archive-url = https://web.archive.org/web/20040922101412/http://www.metronetrail.com/webfiles/General/White_City_Derailment_Final_Report.pdf|archive-date = 22 September 2004 |publisher = London Underground}}{{cite news |last = Clark |first = Andrew |date = 20 August 2004 |title = Private firm blamed for tube derailment |work = The Guardian |location = London |url = https://www.theguardian.com/uk/2004/aug/20/transport.world}}

During March 2005, the House of Commons Transport Select Committee noted that "Availability is the most important factor for Tube travellers. All the infracos needed to do to meet their availability benchmarks was to perform only a little worse than in the past. On most lines, they did not even manage that."{{cite web |date = 9 March 2005 |title = The Performance of the London Underground |url = https://publications.parliament.uk/pa/cm200405/cmselect/cmtran/94/94.pdf |publisher = House of Commons Transport Committee |language = en-GB |page = 9}} That same month, the House of Commons Public Accounts Committee, charged with ensuring value for money in public spending, published a report concluding that it was "impossible to determine" whether the PPP was better value than a publicly run investment programme.{{cite web |date = 9 March 2005 |title = London Underground Public Private Partnerships |url = https://publications.parliament.uk/pa/cm200405/cmselect/cmpubacc/446/446.pdf |publisher = House of Commons Public Accounts Committee |language = en-GB |page = 9}}

In April 2005, the Commissioner of Transport for London, Bob Kiley, pressed for an urgent review of the PPP, describing its performance as "bordering on disaster". TfL also said that new technology promised by Metronet had yet to be seen — "We were supposed to be getting private sector expertise and technology with the PPP (Public Private Partnership) but instead they are just using the same old kit." One week later, the chief executive of Metronet was sacked,{{Cite web |date = 14 April 2005 |title = Metronet boss sacked over delays |url = http://www.theguardian.com/business/2005/apr/14/transportintheuk |access-date = 7 March 2021 |publisher = The Guardian |language = en-GB}} after complaints that the company had made £50{{nbsp}}million profit despite being behind on all its major works.{{cite news |last1 = Vulliamy |first1 = Ed |last2 = Clark |first2 = Andrew |date = 21 February 2005 |title = Down the tube: how PPP deal is costing London |work = The Guardian |location = London |url = https://www.theguardian.com/uk/2005/feb/21/transport.london}} By April 2005, it had started work on only 13 station refurbishments, instead of 32 as scheduled, and was more than a year behind on the refurbishment of 78 District line trains. It was also behind on its track replacement programme, having completed 28 km of the anticipated 48 km.{{cite news |last = Webster |first = Ben |date = 14 April 2005 |title = Metronet behind schedule on all of its main Tube projects |work = The Times |location = London}}

During November 2006, Metronet were heavily criticised by the arbiter of the PPP, the Office of Rail Regulation (ORR) over their performance from 2003 to 2006. Specific analysis included the finding that Metronet had not performed in an economic or efficient manner, and had failed to follow good industry practice. The ORR also stated that Metronet would be held responsible for £750{{nbsp}}million in cost overruns.{{cite news |date = 20 November 2006 |title = Tube and train services disrupted |publisher = BBC News |url = http://news.bbc.co.uk/1/hi/england/london/6164580.stm |access-date = 12 January 2007}} The other PPP consortium, Tube Lines, noted that they were delivering projects on time and on budget.

In July 2007, Metronet admitted that it may have caused a Central Line train derailment near Mile End, in which a train hit a fire blanket left by maintenance workers.{{Cite web |date = 5 July 2007 |title = Metronet admits it may have caused tube derailment |url = http://www.theguardian.com/business/2007/jul/05/transportintheuk |access-date = 7 March 2021 |publisher = The Guardian |language = en-GB}}{{cite book |url = http://www.raib.gov.uk/cms_resources.cfm?file=/2008-01-31-R032008-MileEnd.pdf |title = Rail Accident Report - Derailment of a London Underground Central Line train near Mile End station 5 July 2007 |date = January 2008 |publisher = Department of Transport - Rail Accident Investigation Branch |archive-url = https://web.archive.org/web/20110720090406/http://www.raib.gov.uk/cms_resources.cfm?file=%2F2008-01-31-R032008-MileEnd.pdf |archive-date = 20 July 2011 |url-status = dead}}

In April 2007, Mayor Ken Livingstone stated that Metronet could collapse due to a £750{{nbsp}}million overspend.{{Cite web |date = 24 April 2007 |title = Mayor admits Metronet could collapse |url = http://www.theguardian.com/business/2007/apr/25/transportintheuk.travel |access-date = 7 March 2021 |publisher = The Guardian |language = en-GB}} In July 2007, it was reported that Metronet was "teetering on the brink of administration".{{cite news |url = http://business.timesonline.co.uk/tol/business/industry_sectors/support_services/article2087535.ece |archive-url = https://web.archive.org/web/20110612044452/http://business.timesonline.co.uk/tol/business/industry_sectors/support_services/article2087535.ece |url-status = dead |archive-date = 12 June 2011 |title = Metronet on brink of collapse after plea on costs is rejected |newspaper = The Times |date = 17 July 2007 |location = London |first = Steve |last = Hawkes}} The situation arose because it had received only £121{{nbsp}}million out of the £551{{nbsp}}million that was needed to cover cost over-runs. By contrast, Tube Lines, the other PPP consortium, had brought in almost all of its works on time and on budget.{{cite web |url = http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article1991192.ece |archive-url = https://web.archive.org/web/20110612044515/http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article1991192.ece |url-status = dead |archive-date = 12 June 2011 |title = Partnership that turned sour |publisher = The Times |language = en-GB |date = 27 June 2007}} On 18 July 2007, the company was placed into administration.

To enable its business activities to be kept going while the winding-up of the company was in progress, the British Government provided Metronet with £2{{nbsp}}billion in 2008.{{cite news |title = Govt in £2bn Metronet bail-out |url = http://www.inthenews.co.uk/news/transport/govt-in-2bn-metronet-bail-out-$1197787.htm |access-date = 6 March 2017 |work = inthenews.co.uk |date = 7 February 2008 |archive-url = https://web.archive.org/web/20131026141735/http://www.inthenews.co.uk/news/transport/govt-in-2bn-metronet-bail-out-%241197787.htm |archive-date = 26 October 2013 |url-status = dead }} Following negotiations with Bombardier, Metronet modified contracts to allow for continued delivery of 2009 Stock and S Stock trains, while releasing Bombardier from its obligation to resignal the sub-surface lines.

On 27 May 2008, Metronet came out of administration, and its contracts and employees were transferred to TfL under two new temporary companies, LUL Nominee BCV Ltd and LUL Nominee SSL Ltd. On 3 December 2009, the PPP business of Metronet Rail became an integral part of London Underground. Some of the improvements promised by Metronet were delivered (such as new 2009 Stock and S Stock trains), however other improvements were cancelled or delayed.

During early 2008, the Department for Transport rejected claims that the PPP was to blame for the collapse of Metronet, and that it was "predominantly a corporate failure", with "structural weaknesses [that] led to its own downfall."{{Cite web |date = 31 March 2008 |title = PPP 'not to blame' for Metronet collapse |url = http://www.theguardian.com/politics/2008/apr/01/transport.transport |access-date = 7 March 2021 |publisher = The Guardian |language = en-GB |quote = "The government is clear that this was predominantly a corporate failure, and that the structural weaknesses of Metronet led to its own downfall."}} In 2010, the House of Commons' Public Accounts Committee reprimanded the Department for Transport for its failure to heed National Audit Office warnings about the company's management.{{cite web |url = http://www.accountancyage.com/accountancyage/news/2258786/dot-should-watched-metronet |title = DoT failed to heed NAO warning over Metronet finances |publisher = Accountancy Age |date = 2 March 2010 |archive-url=https://web.archive.org/web/20100818012053/http://www.accountancyage.com/accountancyage/news/2258786/dot-should-watched-metronet |archive-date = 18 August 2010 }} According to the report from the Public Accounts Committee, around £170{{nbsp}}million to £410m of taxpayer money was lost due to the failure of Metronet.{{Cite web |date = 22 February 2010 |title = House of Commons Committee of Public Accounts - Department for Transport: The failure of Metronet |url = https://publications.parliament.uk/pa/cm200910/cmselect/cmpubacc/390/390.pdf |publisher = Public Accounts Committee}}{{Cite news |date = 2 March 2010 |title = 'Poor management' failed Metronet |language = en-GB |publisher = BBC News |url = http://news.bbc.co.uk/2/hi/uk_news/england/london/8544491.stm |access-date = 7 March 2021}} The companies involved in the consortium collectively lost around £350{{nbsp}}million in the collapse.

In May 2010, it was announced that TfL would buy out the Tube Lines consortium, formally ending the PPP.{{cite news |date = 8 May 2010 |title = Tube maintenance back 'in house' as new deal is signed |work = BBC News |url = http://news.bbc.co.uk/1/hi/england/london/8669823.stm |language = en-GB |access-date = 10 May 2010}}{{Cite web |date = 7 May 2010 |title = Amey sells its stake in Tube Lines to Transport for London (TfL) and agrees to continue with the maintenance service |url = https://newsroom.ferrovial.com/en/press_releases/amey-sells-its-stake-tube-lines-to-transport-london-tfl-agrees-to-continue-with-the-maintenance-service/ |access-date = 8 March 2021 |language = en-GB |publisher = Ferrovial}}{{Cite web |date = 27 June 2010 |title = New era for the Tube as Transport for London completes acquisition of Tube Lines |url = https://tfl.gov.uk/info-for/media/press-releases/2010/june/new-era-for-the-tube-as-transport-for-london-completes-acquisition-of-tube-lines |access-date = 8 March 2021 |publisher = Transport for London |language = en-GB}} Commentators blamed the complex and "onerous" contracts for its failure.{{Cite web |date = 14 May 2010 |title = Tube Lines deal collapses amid cost accusations and fears for future work |url = https://constructionmanagermagazine.com/tube-lines-deal-collapses-amid-cost-accusations-an/ |access-date = 8 March 2021 |website = Construction Manager |language = en-US}} Combined with the takeover of Metronet, this meant that all maintenance was thereafter managed in-house, although TfL has continued to use a large number of private suppliers and contractors. By the beginning of 2011, with the formal liquidation process having been completed, the Metronet brand and group of companies had ceased to exist.

• History of the London Underground
• Tube Lines, the other PPP consortium responsible for London Underground infrastructure from 2003 to 2010

{{Reflist}}

{{wikinews|UK tube company Metronet goes into administration}}

• [http://www.citymayors.com/transport/london-transport.html CityMayors article]
• [https://www.bloomberg.com/apps/news?pid=20601102&sid=aW9.a.VhwWbM&refer=uk Bloomberg.com]

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Category:London Underground infrastructure

Category:Public–private partnership projects in the United Kingdom