The Office of Rail and Road (ORR), the UK’s regulatory body for the rail and road sectors, will reduce the risk charges levied by Network Rail on third-party and private investors who finance or carry out works on the rail network. The measure is part of a broader package of changes aimed at encouraging direct private investment in the UK’s rail infrastructure.

Network Rail, the rail infrastructure manager, charges such fees to cover the risks it assumes when a third party finances or carries out works on the rail network. Investors may include local authorities, real estate developers, freight operators, ports, airports, rail operators, and other private organizations interested in financing infrastructure improvements.

The decision follows an in-depth analysis of the Rail Network Investment Framework (RNIF), the framework through which third-party investments can be integrated into the rail network. The analysis was conducted by the ORR at the request of the UK Treasury to support direct private investment in infrastructure.

In a letter sent to the Treasury, ORR notes that the current contributions paid by third parties to Network Rail are above the level necessary to cover break-even costs. The Authority states that risk funds are, on the whole, more than sufficient, although the situation differs among the main mechanisms analyzed.

The analysis included the industry’s risk fund, Industry Risk Fund (IRF), and Network Rail’s fund, Network Rail Fee Fund (NRF). These are components of the RNIF and are intended to provide a consistent approach to risk allocation and liability coverage in third-party-funded projects.

The ORR asked the UK government’s actuarial department to conduct an independent assessment of these funds. The aim was to verify the conclusions of a previous technical analysis and improve how the risk mechanisms operate, so that they are credible, proportionate, and conducive to long-term investment in the rail network.

The ORR will work with Network Rail to reduce charges and bring them closer to the break-even point. Adjustments will be made depending on the type of contract, and details are to be presented in the fall of 2026.

The Authority does not currently recommend changing the GBP50 million threshold used under the RNIF. The analysis shows that there is limited evidence to support changing this threshold, given that only four agreements from the CP7 control period exceed this level.

Furthermore, the ORR will not introduce mechanisms for strict segregation of funds or the accrual of interest for risk funds. The assessment showed that the financial justification for these measures is limited, and the administrative costs would be too high.

Investments made through the RNIF may include station upgrades, urban regeneration projects, rail freight infrastructure, depots, accessibility schemes, and broader connectivity works.

The ORR argues that the fee reduction is part of a package of changes intended to make the system clearer, fairer, and more proportionate, while maintaining the necessary protections for the rail industry and taxpayers.

“We recognize the importance of third-party and private investment in the railways for growth, and we are proud of our regulatory work to facilitate this,” said Graham Richards, Director of Planning and Performance at the ORR.

“Our recommendation to reduce risk charges for third parties and private investors is part of our broader work to make investment in the British rail network clearer, fairer, and based on proportionate rules, to protect the industry and taxpayers,” he added.

The RNIF analysis was conducted in several stages. The first phase gathered feedback from investors and industry stakeholders and highlighted the need for clearer guidance on the investment process and the options available for financing different types of rail projects.

The second phase included a technical analysis of key investment mechanisms, including venture capital funds, the risk allocation matrix, contractual models, and the value thresholds governing their use. The ORR notes that minor updates were also made to ensure the system remains relevant and accurate.