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Monday, 8 October, 2001, 12:09 GMT 13:09 UK
Rail users promised 'fresh start'
Railtrack headquarters
Railtrack will cease to exist in its current form
Transport Secretary Stephen Byers has promised Britain's rail users a "fresh start" following the collapse of track and signals company Railtrack.

Rise and fall of Railtrack
1996: Privatised. Shares cost 3.80
Sep 1997: Southall crash kills seven
Oct 1998: Shares hit highs of 17
Oct 1999: Ladbroke Grove crash kills 31
Nov 1999: 1m a day profits
Oct 2000: Hatfield crash kills four
May 2001: First loss - 534m
June 2001: Harshly criticised in Ladbroke Grove report
June 2001: Boss Gerald Corbett resigns
July 2001: New boss John Robinson apologises for "appalling" year
October 2001: Placed into administration

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."

"New company"

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".

Stephen Byers
Byers: 'no more bail-outs'

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.

Legal threat

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.

I am gutted. I did not anticipate it would happen. There was no hint of an imminent collapse

David Bigg, Railtrack shareholder

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.

'Unforeseen costs'

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, Association of Train Operating Companies

"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.

Passenger reaction

Rail passengers at London's Euston station welcomed the end of Railtrack.

It is about time the government stepped in

Paul Dhanjal, rail passenger

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."

The BBC's Simon Montague
"A renationalisation in all but name"
Transport Secretary Stephen Byers
"They failed to provide a good railway network"
George Muir of the Association of Train Operators
"The trains will run normally"
See also:

08 Oct 01 | England
Trial run for tilting train
08 Oct 01 | Business
Railtrack in administration
05 Aug 01 | Business
Railtrack may axe managers
02 Aug 01 | Business
Railtrack operations chief axed
23 Jul 01 | Business
Railtrack funding under threat
24 May 01 | Business
Railtrack reports massive loss
07 Oct 01 | Business
Railtrack privatisation 'flawed'
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