Rail open access and freight: The opportunity for the private sector in a mostly nationalised railway
As the UK accelerates its programme to bring passenger rail services back into public ownership, the most commercially dynamic segment of the rail market, open access, will remain firmly in private hands with significant opportunities still to play for. With recent acquisitions, route expansions and record levels of private investment, open access is no longer a niche market in the UK rail landscape; it is becoming the heart of where private sector rail activity will continue.
However, the detailed picture is more complex. Beneath the investment surge lies a regulatory transformation that will fundamentally alter the economics and legal framework within which open access (and freight operators) must operate.
Open access operators are privately-owned companies running rail services without government funding or taxpayer subsidies, instead covering their costs through ticket sales and other revenue streams. Open access operators run independently on the national network, often in competition with public-sector or DfT contracted operators. They do not lease or operate their own railway stations but run their services by calling at stations operated by other train companies under regulated station access agreements and paying track access charges to Network Rail.
As major franchises transfer into public ownership at an average pace of one every three months, the remaining private sector activity is increasingly concentrated in open access (and freight). The fifth franchise operator, Govia Thameslink Railway, entered public ownership on 31 May 2026. Chiltern Railways is due to follow on 20 September 2026, with the remaining operators scheduled to transfer by October 2027. Open access services structurally fall outside of the nationalisation programme as they pay fees to run services (taking full financial risk) without Government funding.
Freight operators occupy a parallel position. Both open access passenger operators and freight operators face the same fundamental challenge: operating as private, non-GBR entities on infrastructure owned and managed by GBR, under rules and charges set by GBR.
Market activity: Investment, route expansion and growth
There are currently three open-access passenger operators in Great Britain, Lumo, Grand Central and Hull Trains (all operating on the East Coast Main Line). Heathrow Express and Eurostar operate under different rail access arrangements so are not conventional open access operators, and the Caledonian Sleeper is owned and funded by the Scottish Government).
In December 2024, FirstGroup completed the acquisition of Grand Union Trains GWML Holdings Limited, securing ORR-approved track access rights for a new Carmarthen to London Paddington service scheduled to begin in December 2027, giving FirstGroup a ten year open access foothold in South Wales, with projected annual revenues of around £50 million after two years.
FirstGroup, already a major player in open access through Hull Trains (operating between the Hull/Humber region and London) and Lumo (running on the East Coast main line), has actively acquired licences for new open access routes. In July 2025, it secured significant service extensions for both Lumo and Hull Trains, adding connections to Glasgow, extra services between Newcastle and London, and additional capacity between London and Hull. These extensions will more than double the company's open access seat-mile capacity when combined with forthcoming Carmarthen and Stirling routes. In October 2025, FirstGroup submitted further applications to the ORR to operate a new proposed open access service between Cardiff and York, a Rochdale to London Euston route from December 2028, and an extension of its Stirling to London Euston track access rights beyond 2030.
Open access operators have generated millions of additional journeys, boosted economic growth, and spurred new manufacturing contracts, including £500 million investment in new rolling stock for Lumo and Hull Trains at Hitachi’s Newton Aycliffe factory, securing skilled UK jobs. Future regulatory approvals could potentially unlock a further £460 million if more routes are approved. Whilst Lumo competes directly with LNER on the high-demand London to Newcastle and London to Edinburgh routes, Lumo's entry on the London to Edinburgh route has shifted modal share from aviation to rail, with rail's share on that route increasing from 37% in 2019 to 63% in 2022, a gain that has benefited both Lumo and the incumbent operator, LNER.
The existing charging framework
Access charges are currently paid by passenger, freight and charter operators for the use of Network Rail’s infrastructure. These charges are designed to ensure that the costs of maintaining and renewing the network are recovered fairly from its users, alongside contributions from taxpayers.
Under Schedule 3 of the Railways (Access, Management and Licensing of Railway Undertakings) Regulations 2016 (the “2016 Regulations”) charges for the minimum access package and track access must be set at “the cost that is directly incurred as a result of operating the train service” by the infrastructure manager, commonly referred to as the “variable charge”. This allows regulatory constraint, and prevents charges simply being set at a level that maximises profit for the infrastructure manager.
Under the current regime, the general position is that ORR establishes the charging framework and specific charging rules, and the infrastructure manager determines and collects fees in accordance with it. The ORR must ensure that infrastructure charges comply with Part 4 and Schedule 3 of the 2016 Regulations, with an obligation to intervene in charging negotiations likely to contravene the requirements of the Regulations. Applicants who believe they have been unfairly treated, discriminated against, or aggrieved, including in relation to the charging scheme system, charging system or the level or structure of charges have the right to appeal to the ORR. The ORR also conducts periodic access charges reviews under Schedule 4A to the Railways Act 1993, under which it reviews the charge terms of access agreements and linked licences.
In 2023–24, the operators that will in future be non-GBR, comprising devolved public service operators, freight, open access and charter operators, paid £912 million in charges, representing 30% of Network Rail's charges income or 7% of gross revenue.
The new framework under the Railways Bill
The Railways Bill, currently before Parliament, will establish a fundamentally different regime with responsibility for access and charging decisions transferring to GBR.
GBR as decision-maker, access and charging scheme framework
GBR will be required to develop, and consult on, an access and use policy under clause 59 of the Railways Bill, forming the basis of the access procedures applicable to non-GBR operators.
Under clause 64 of the Railways Bill, GBR must make a charging scheme setting out the charges to be made for access to and use of GBR infrastructure for the operation of trains (and in relation to trains planned to use GBR infrastructure that do not run or do not run in full). Subject to permitted variations, charges for operating a train must be set at the cost directly incurred as a result of that operation. ORR's historic function as primary decision-maker, approving access charges through binding periodic review under Schedule 4A to the Railways Act 1993, will be replaced by a more limited appeals function.
In terms of GBR's broader funding framework, the Railways Bill gives ORR a statutory monitoring function over the exercise of GBR's statutory functions, and requires GBR to consult ORR before issuing, revising or replacing the access and use policy. Under Schedule 2 of the Railways Bill, GBR must provide a business plan to the ORR, approved by the Secretary of State, and the Secretary of State must provide the ORR and GBR with a statement setting out the funding objectives in relation to a funding period after consulting the ORR and GBR. These provisions position ORR's role in the new framework as an advisory and appellate body, rather than that of primary regulatory decision-maker.
The evolving role of the ORR
Under the Railways Bill, the ORR is given an appeals role for aggrieved parties by a provision in a GBR document on access, use or capacity or a provision in the charging scheme, or by GBR's decisions on access, use and charging. Critically, when determining such appeals, the ORR must apply the same principles as the High Court on an application for judicial review (or, in Scotland, the Court of Session's supervisory jurisdiction). This is materially narrower than a full merits review.
If ORR allows an appeal, it may, in the case of a provision in a GBR document on access, use or capacity or a provision in the charging scheme, remit all or part of the provision to GBR for reconsideration, and in the case of working timetable or specific access, use or charging decision, quash all or part of the decision. Where it remits a matter to GBR for reconsideration, the ORR may give GBR directions as to the that reconsideration. Where it quashes a decision, the ORR may substitute its own decision, but only in the narrow circumstance where the quashing is on the ground of an error of law and, absent that error, there would have been only one decision which GBR could have reached.
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Appeals and enforcement limitations
Beyond the narrow scope of the ORR's remedial powers on appeal lies a more fundamental problem, as the ORR has no effective means of enforcing any outcome it does reach against GBR. Clause 75 of the Railways Bill amends the Railways Act 1993 to disapply certain specific ORR enforcement tools against GBR. The ORR may not impose a penalty on GBR, and it may not, by final or provisional order, require the payment of a sum by GBR. The practical consequence is that, where the ORR allows an appeal against a charging scheme and remits the matter to GBR for reconsideration, there is no financial deterrent against GBR reaching the same or a materially similar decision on reconsideration, and no mechanism for the ORR to compel a different outcome.
A second appeal would again result in remittal. The absence of any penalty backstop, combined with the narrow substitution power, means that the appeal remedy available to a non-GBR operator against a GBR charging decision is materially weaker than the remedies available in comparable regulated sectors. There is also no right of appeal to the Secretary of State against an ORR determination, the Secretary of State's role under clause 68(6) is confined to procedural matters, so the only external check on an ORR decision is judicial review before the courts.
Differential treatment: GBR vs non-GBR operators
The Railways Bill expressly provides that the charging scheme may not provide for charges to be made in relation to GBR passenger services. As GBR will own the infrastructure and operate the services that use it, there is no internal need to levy track access charges on its own operations. The consequence is that GBR’s services bear no access charge costs, whilst open access and freight operators continue to pay charges, now set by GBR itself, which is simultaneously their competitor and the controller of the infrastructure on which they rely. As the Rail Freight Group has highlighted, without GBR being exposed to the same cost discipline imposed by access charges, the framework risks becoming fundamentally one-sided.
Removal of cap
Under the current framework, the 2016 Regulations provide regulatory safeguards, including the requirement that charges for the minimum access package do not exceed directly incurred costs, and the cap on freight variable charges, which impose a binding ceiling on what the infrastructure manager may charge. Under the Railways Bill, the ORR will no longer exercise ex ante control over the level of charges, GBR will set the charging scheme, and the ORR will review it only through the specified appeals mechanism applying judicial review principles with the limited and constrained enforcement powers noted above. The directly incurred cost basis is preserved as the legislative baseline under clause 67(2) of the Railways Bill. Clause 64(3) further provides that, where charges are set above that baseline, they must not exceed the amount that GBR considers an efficient operator would be able to pay in those circumstances providing a statutory ceiling, but one assessed by GBR itself, without prior independent verification or regulatory pre-approval. There is therefore no independent regulatory body with power to cap or pre-approve charges before they are imposed. For both freight and open access operators, the removal of the cap or pre-approval on variable charges is a particular concern, given the competitive sensitivity of freight and passenger operations to infrastructure cost increases.
Track access charges represent a significant cost for rail freight customers, so proposed changes to the charging framework risk making rail less competitive, potentially leading to a shift of freight to road and undermining the Government’s objective of growing rail freight volumes.
Impact on private investment and regulatory certainty
Private investment in open access operations relies on the presence of an independent regulator with meaningful enforcement powers. Clause 75 of the Railways Bill removes those powers in respect of GBR. Replacing independent ex ante charge control with a GBR-set scheme, reviewable only on judicial review principles and without financial penalties, materially alters the regulatory risk profile for private capital, which may be seen as a less certain basis for long-term investment. This concern does not apply to GBR, which can be supported by Government funding and is not reliant on private capital or regulatory certainty in the same way.
Conflict of interest risks
The transfer of certain regulatory functions to GBR, as both infrastructure manager and primary operator, creates an inherent conflict of interest. Ensuring the viability of non-GBR services, whether open access, devolved or freight, depends on robust and independent oversight of track access and operational decisions.
Under the proposed arrangements, where a non-GBR operator challenges a GBR charging or access decision, any appeal is determined by the ORR applying judicial review principles. The structural concern is that, as a body whose role in the new regime is materially narrowed, and given that the Secretary of State, who both owns GBR and approves its business plan and funding, is the relevant policy-setter, the oversight framework introduces a circularity with no clear parallel in other major regulated sectors. This structural dynamic will require careful analysis in the context of each access decision or challenged charge.
Capacity and network access
The DfT has already expressed concerns about the strain additional open access paths could place on congested infrastructure, and the potential impact on publicly operated services. The DfT has signaled that cumulative impacts, not just individual applications, should be taken into account, warning of potential performance degradation and revenue displacement.
The Secretary of State's letter of 6 January 2025 also identifies the need to balance the impact of open access on taxpayers and existing passengers and GBR's ability to operate the network efficiently and flags the risk of open access abstracting revenue from GBR operators.
The Railways Bill introduces a "capacity duty" under which GBR must retain sufficient capacity for its own passenger services (including expected future GBR services) and for maintenance and improvement. The interaction between this duty and the rights of open access and freight operators to secure paths on a non-discriminatory basis will be one of the most significant legal junctures of the new regime.
Meanwhile, operators argue that the integrity and independence of the ORR’s decision making must be preserved, especially in the face of increased nationalisation. FirstGroup, in its April 2025 submission, urged government not to prejudice ORR independence as it adjudicates new open access bids, highlighting the importance of competition and commercial innovation in the sector’s future.
Implications for private sector participants
Open access will be the primary, and perhaps only, long-term pathway for private sector participation in UK passenger rail operations. The key areas of legal complexity will include:
Open access and freight operators entering new access agreements, or renewing existing ones, must understand that the charges they will face from commencement of the new regime will be set by GBR in its capacity as both competitor and infrastructure manager without ex ante ORR oversight or approval.
The terms, including the duration, of access rights granted by GBR, and whether GBR will offer longer contractual certainty than the current five-year norm. This will be commercially and legally critical, and a matter entirely within GBR’s discretion. As a body with a direct commercial interest in preserving capacity for its own competing services, it may not be incentivised to do so.
Operators will need specialist advice on the scope of the ORR's appeals function (applying judicial review, not merits, principles), including the circumstances in which GBR may be found not to have complied with its legal duties, licence obligations or established policies, and the limits of the ORR's remedial powers on a successful appeal.
The framework for ensuring fair treatment of non-GBR operators, including challenging GBR charges or access decisions on non-discrimination grounds will require a sophisticated understanding of the interaction between the Railways Bill's access and use policy regime and retained public law principles.
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Open access operators are not merely surviving the transition to public ownership, they are expanding, investing and redefining the future of private participation in UK rail. However, the reform programme will test the resilience of open access and freight operators.
Shifting charging decisions from an independent regulator to GBR, which also owns and operates the infrastructure, runs competing services, and pays no access charges, creates structural tensions requiring legal and political scrutiny. The Railways Bill as currently drafted narrows ORR's role to that of an appeals body applying judicial review principles, removes the ex-ante charging constraints that currently protect non-GBR operators, and places ultimate policy authority over GBR with the Secretary of State.
Get in touch with our Transport team if you'd like any further information or advice on anything covered in this article.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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