Case study: Transport

Assessment of UK rail Infrastructure Owner's management of inflation risk

The Problem: Historic RPI inflation leading to swings in expenditure

The Infrastructure Owner's expenditure is c.£6bn p.a., c.£4bn of which is funded through its network grant from the Government.

All income and expenditure has historically been inflated by RPI which has meant substantial swings in expenditure. The budgetary uncertainty that the Treasury funds can be up to £300m p.a.

Our Approach: Quantification of inflation risk

In order to constrain the financial uncertainty related to the network grant, the Regulator commissioned a study to assess the management of input price and general inflation.

The study was intended to inform the debate between the Regulator and Infrastructure Owner on the final determination for CP5 funding (c.£42bn over 5 years).

Our work covered:

The Result: Recommendations for inflation management

In the final report submitted to the UK Rail Regulator we:

Our report has recently been published by the Office of Rail Regulation and can be found on their website. [Download]


Matt Lovering
Matt has over 15 years' experience providing commercial and strategic advice to the transport industry. He has extensive experience advising operators, policy makers and investors across the passenger rail, airport and transport technology markets, developing demand forecasts, commercial strategies and business cases for existing businesses and new schemes.
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