LNER losses and taxpayer subsidy double raising questions over rail nationalisation plans

Annual losses and taxpayer subsidies at LNER have doubled according to the latest figures from the Office of Rail and Road. LNER, the state operator for London Kings Cross and a model for Labour’s proposed renationalisation of the railways, reported an £88 million operating deficit for 2024 to 2025. Taxpayer support also rose sharply with net subsidies reaching £93 million compared to £40 million in the previous year. This follows a period when the franchise under private operators was highly profitable, generating an aggregate surplus of £978 million in its final three years and delivering £1.07 billion to the Treasury.

Passenger numbers on the east coast main line have increased by 12 per cent from pre pandemic levels. Despite this, revenues from fares totalled £948 million last year, which is still 15 per cent below the final year of Virgin Trains East Coast’s private operation. Much of LNER’s financial burden is attributed to lease and maintenance payments for its Azuma intercity trains. The company paid £423 million to Agility Trains, a rolling stock lessor and train manufacturer, representing nearly half of total annual revenue. Agility Trains, owned by Hitachi and several City infrastructure funds, continues to profit while escaping the government’s nationalisation plans.

The deficit at LNER has reignited debate about the wisdom of rail renationalisation. By contrast, Avanti West Coast, run by FirstGroup and servicing London Euston, doubled its operating surplus last year to £160 million and paid £216 million to the Treasury over the last two years. Critics argue that private sector operators deliver greater efficiencies and returns to the public purse than their nationalised counterparts.

The existence of open access operators on the east coast main line complicates the financial picture. Privately owned companies such as Grand Central, Hull Trains and Lumo successfully serve routes overlooked by LNER. However, their success may be diverting revenue from the Treasury, drawing concern from the Department for Transport.

LNER’s increased losses have been attributed to a rise in unexpected running costs and recent investment in staff and network expansion. A company spokesperson stated that the increased government support has enabled LNER to make strategic hires and invest in preparation for the December 2025 timetable, aiming to return to profitability in future years.

The Department for Transport maintains that wider reform will reduce public subsidy over the long term, estimating annual savings of up to £150 million by eliminating fees paid to private firms. The upcoming consolidation of regional train contractors into the new Great British Railways will be closely watched by industry and policymakers as the nationalisation experiment unfolds.