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Monday, 8 October, 2001, 12:09 GMT 13:09 UK
Rail users promised 'fresh start'
Transport Secretary Stephen Byers has promised Britain's rail users a "fresh start" following the collapse of track and signals company Railtrack.
Mr Byers admitted that "big money" was needed to overhaul the country's crumbling rail infrastructure.
But he insisted that the cash would still be available despite the winding up of Railtrack.
The government asked the High Court to put Railtrack into administration on Sunday, after refusing to put any more money into the company.
No job losses are expected and rail services will be unaffected.
Speaking on BBC Breakfast, Mr Byers said: "There will be no more bail-outs for Railtrack.
"They failed to run a rail network. I think the travelling public are fully aware of that and I think it is time for a fresh start."
Mr Byers said he wanted to create a new, not-for-profit company to take over the rail network, "one which has no shareholders - but one simple objective to put the interests of the travelling public first".
The firm would include representation from train operators, freight companies, unions and passenger groups, and would not have a stock market listing.
Private sector investment would still be sought, particularly in big one-off projects such as the West Coast Mainline revamp.
This private cash, coupled with the government's promised £30bn over the next 10 years plus income from train operating firms, would pay for improvements, he said.
Markets not convinced
Rail pressure group Transport 2000 welcomed the government's decision to replace Railtrack with a new, not-for-profit company, saying it would bring "greater stability" and be a "big step towards a better railway".
But the markets were far from convinced by Mr Byers' plans, which are likely to leave Railtrack shares worthless.
"The whole episode has left a nasty taste in people's mouths," said one dealer in the City, where shares in train operating companies plunged in Monday morning trade.
Investors were also pessimistic about the prospects of tapping private cash for major upgrade projects, undermining the price of shares in rail construction companies.
Shareholders lose out
Railtrack's collapse is the biggest corporate failure in recent UK history.
At its height three years ago, the company had a stock market value £9bn, compared with £1.46bn at close of trade on Friday.
Trading in Railtrack shares was suspended before market opening on Monday.
Mr Byers said there would be no public money to bail out shareholders, leaving the thousands of investors who clamoured for Railtrack shares, at its high-profile 1996 flotation, likely to lose every penny of their investment.
The company has about 250,000 shareholders, the vast majority of whom hold less than 5,000 shares.
How much Railtrack shareholders will eventually receive will be down to the administrator Ernst & Young and the final figure will not be known for some months.
Railtrack's creditors will be ahead of shareholders in the queue for cash.
Legal and General, one of Railtrack's biggest investors, said it expected to receive between zero and 50p a share, although it was "likely to be closer to zero".
After floating at 380p in May 1996, Railtrack shares peaked at more than £17 in November 1998.
Investors could, in theory, take the government to court over its decision to call in the administrators, but most analysts consider this course of action unlikely.
The financial collapse of a listed company, although rare, is one of the risks inherent in owning shares.
The speed of Railtrack's fall from grace has surprised many in the rail industry.
"It has happened very suddenly, although we knew Railtrack was short of money," George Muir, director general of the Association of Train Operating Companies, told BBC News Online:
"However, we are reassured that the government has confirmed its long-term investment plans."
Mr Muir said he now expected local train operating companies to become more closely involved in track maintenance, although the bulk of investment would come from the new non-profit making company.
He said the aim was to "create a virtual integrated railway," with much closer co-operation between the train operating companies and the track maintenance company.
Massive unforeseen costs, such as a huge growth in passenger numbers and the cost of repairing the network after the Hatfield disaster, had led to Railtrack's financial collapse, he added.
Rail passengers at London's Euston station welcomed the end of Railtrack.
Paul Dhanjal, 30, an IT support consultant from Streatham, south London, said: "It is about time the Government stepped in.
"Railtrack has not worked and hopefully this new body can improve things."
Beverley Thompson, 43, a management consultant from north London, said: "I was a bit shocked when I heard the news but I was never a big one for privatisation of the rail service. I think it is a good move."
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