Message from Mark Hopwood at SWR to key stakeholders, 21.9.20, ERMA and beyond

Quoting ...

Dear [Stakeholder name],

As one of our key stakeholders I wanted to let you know that the Department for Transport has today announced the extension of the emergency funding arrangements for the UK^▸ rail industry. The new measures for South Western Railway, alongside other rail operators, came into force yesterday.

A new Emergency Recovery Measures Agreement (ERMA) replaces the Emergency Measures Agreement, which was put in place by the DfT^» in March to provide continuity for rail passengers and the industry during the coronavirus pandemic, and are similar in operation. During the term of the ERMAs, the DfT will continue to waive the revenue, cost and contingent capital risk of the train operating companies (TOCs^▸ ) and will pay them a fixed management fee. There is also the potential for an additional performance-based fee, based on measures including punctuality, passenger satisfaction and financial performance. The overall fee potential is a maximum of 1.5% of the cost base of each franchise prior to the pandemic. The fixed fee and overall fee potential for each TOC is lower under the new ERMAs compared with the Emergency Measures Agreements, and more heavily weighted to performance delivery. The ERMAs make no material changes to the ring-fenced cash or working capital mechanisms in place for these operations.

The new SWR^» ERMA is in place to the end of March 2021, and includes an option to extend by a further half year at the DfT?s discretion.

The DfT has also stated it intends to begin discussions with the TOCs to transition to new, directly-awarded contracts for the longer term, which would come into effect at the end of the ERMAs.

Commenting on today?s announcement, FirstGroup Chief Executive Matthew Gregory said:

?The Government has extended its funding of the rail industry whilst demand for services remains heavily affected by coronavirus, and we are pleased that the vital nature of rail services to communities and local economies is being recognised.

?Passengers can be confident that public transport is safe and across our rail networks we have increased service levels to provide more capacity as schools restart and many more workplaces and other facilities reopen. We are now operating around 90% of the rail services we were prior to the pandemic. We will continue to bring all our expertise to bear alongside Government and industry partners to deliver the next phase of recovery of the rail network.

?We have long advocated for a more sustainable long-term approach to the railway, with passengers at its centre, and we look forward to working constructively with the DfT to make this a reality.?

During the last few months we have delivered a much better performing railway and, as passenger numbers continue to increase, our priority is to maintain that performance, alongside keeping all our customers and colleagues safe.

I look forward to continuing our strong relationships as we work together to support our communities and economies through recovery.

Yours sincerely

Mark Hopwood
Managing Director
South Western Railway