Edinburgh Napier University

  This paper briefly outlines the main changes brought about by the Railways Act 1993 with regard to the rail freight sector and then examines development of the sector since that time. It finds that although rail freight levels have increased, these in the main have been as a result of changes that have occurred outside of the industry. It also finds little evidence of new operator entry into the rail freight business despite the removal of legal barriers to operation. The paper then gives an overview of the main medium and longer term effects of rail freight reform, principally through a literature review on US railroad deregulation, before examining productivity and scale effects within the British industry since privatisation. What it finds is that in the case of the former productivity has been rising from negative values at the start of the period reviewed, and economies of scale whilst significant should not be viewed as a major barrier to entry and hence do not account for the low level of entry that has occurred since privatisation. The over-riding conclusion is that policy needs to do more and be more innovative in incentivising the industry otherwise long term decline could very quickly set back in.