From the FT:

Train operators in England are preparing to make further cuts to their
budgets as the rail industry struggles to recover from a big hit to
revenues following the coronavirus pandemic.

The UK government, which controls the industry’s finances after in effect
renationalising it during Covid, has asked companies to identify savings in
their business plans for the next financial year beginning in April,
according to two people familiar with the matter.

The demand for further savings comes despite austerity measures already
forced on the industry in the wake of the pandemic and while no final
decisions have been taken, one of the people warned it would be extremely
difficult to take more costs out without affecting services.

Train operators in England had been planning to generate significant
savings from the mass closure of ticket offices, but the government ordered
a U-turn in October following a public backlash. Rail is devolved in
Scotland and Wales.

Some train companies have already slimmed down their timetables and reduced
the length of trains by running fewer carriages on some services to save on
electricity and track access charges, as well as cutting other costs
including cleaning, catering and marketing.

The heavily subsidised industry is under pressure as rail passenger numbers
have failed to recover after the pandemic, particularly during peak
commuting hours following the rise in remote and flexible working.

Passenger journeys in the week ending December 3 were still 20 per cent
below the equivalent week in 2019, according to the most recently available
government figures. The data excludes the Elizabeth Line in London, which
was not running in 2019.

Lower usage has hit revenues hard in recent years. In 2022-23, the last
full financial year, revenues totalled £9.2bn, more than £4bn below
pre-pandemic levels.

As a result, ministers have poured in billions to prop up the industry
since the pandemic hit, with £11.9bn of taxpayer funding in 2022-23,
including £4.4bn to support train operators. This was a drop from the
£14.6bn in the previous 12 months but still more than double the £5.1bn in
subsidies in 2018-2019, the last year before the pandemic hit.

Ministers earlier this month capped next year’s rail fare increase in
England at 4.9 per cent, well below July’s retail price index figure of 9
per cent on which annual fare rises have historically been based.

This will have little impact on operators, as all fare revenue is passed to
the Treasury with the government paying operators a management fee to
operate services.

Industry executives have complained that the tight government controls have
removed any commercial incentives to grow traffic and have called for more
freedom to launch initiatives to boost passenger numbers instead of
focusing on cost-cutting to reduce reliance on state subsidies.

But one government figure said that ministers believed that the rail
operators could provide the same level of service on a somewhat tighter
budget. “We’re still subsiding rail by a heck of an amount,” they said. “We
want the same output for less money.”

Norman Baker, a former transport minister who now works with the pressure
group Campaign for Better Transport, criticised demands for further cost
savings. “Making cuts to services and facilities . . . can only drive
people off trains and make the imbalance between expenditure and income
worse. The answer is not to make cuts to services but cuts to fares to get
people back on board.”

The government said: “We have been upfront about the need to reform our
railways in order to make them financially sustainable, and we expect
operators to maintain services while ensuring passengers are provided
better services at no additional cost to the taxpayer.”