
CP7 Delays is Causing Havoc for Smaller Rail Suppliers 😢
The delays in Network Rail’s spending on future rail projects at the start of Control Period 7 (CP7) are more than likely linked to several factors, all leading to severe impacts on contractors, with some companies going bust due to a lack of work. So where could these delays be coming from?
1) Budget Constraints & Spending Reviews 💷
Fiscal pressures & high public debt are affecting government departments like the Department for Transport (DfT), which funds Network Rail. In turn this has caused uncertainty around CP7 funding finalisation & delaying project approvals.
2) Project Pipeline Delays & Re-evaluation of Priorities
Projects expected to start in CP7 are being re-evaluated, especially those focused on sustainability and digitalisation. This reassessment causes delays in project approval and commencement. Also many projects are still in early stages of planning or design, pushing back construction timelines, leaving a gap in the project pipeline.
3) Changes in Rail Industry Structure & Reform
Under the Williams-Shapps Plan, such as the creation of Great British Railways (GBR), are causing uncertainty within Network Rail. This transition is slowing down decision-making & project approvals as responsibilities shift.
Also as Network Rail prepares for the GBR transition, internal changes in management and governance are contributing to delays in project execution.
4) Contractual Delays and Procurement Issues
Prolonged negotiations over pricing & scope, especially in a volatile economic climate, are delaying the finalisation of contracts between Network Rail and its contractors.
Complex Procurement: Network Rail’s procurement processes, subject to public sector rules, can be slow. Delays in tendering and awarding contracts are leaving contractors without work.
5) Impact on Smaller Contractors
Cash Flow Issues: Smaller contractors, heavily reliant on Network Rail projects, are facing cash flow problems due to the delays, forcing some into insolvency. Larger firms may survive longer by diversifying or drawing on reserves, but smaller companies are more vulnerable.
Uncertainty: Contractors are now hesitant to invest in resources, staff & training without clear project timelines, which is compounding financial strain.
Conclusion:
These delays are severely affecting contractors, especially smaller ones, by creating large gaps in project pipelines leading to business failures. It will also be interesting to see what the National Infrastructure and Service Transformation Authority (NISTA) will do to help address this current situation.