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06 Dec 2016
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In this series of three articles, we will explore how the rail sector responds to the very real demands of harnessing new technology, improving the customer experience, encouraging innovation and developing new funding models.
You can find the second article in the series, which looks at encouraging and fostering the right environment for innovation, here.
How do we fast-track change and what will future funding models look like?
It is clear that funding models need to be evaluated within their individual political, legal and regulatory contexts. What works in one culture may well jar elsewhere. Governments around the world are looking for new ways of funding infrastructure projects. The flip side of the coin of innovation is risk. Third party funding is emerging as a viable route, but for it to be successful, there needs to be a top down government-led approach which aligns funding mechanisms and procurement models with this new source of revenue.
Private investors bring a fresh perspective. As with any commercial organisation, they tend to be very streamlined in their thinking, responsive to the demands of their shareholders and keen to reap the maximum benefit of their funding of a project.
Collaboration, not just between lender and recipient, but also across the industry to promote an environment in which lending into the sector is an attractive and viable option, is essential. For new models of funding to be successful, there needs to be a whole-industry approach.
There also needs to be an understanding that the rail industry is a complex space. Lenders need to be clear about the gestation period and lifecycle of a project, and frankly, when and how they can expect to see a return. They also need to be able to manage the risk they assume. Imbuing lenders with a degree of technical knowledge, as part of a collaborative approach, could be part of the answer.
Industry also needs to interrogate the role it wants a lender to play.
Are we looking for silent partners, or willing collaborators? Sharing ownership at the top table makes sense, as those who feel loyalty to a project are more likely to expend blood, sweat and tears to see it succeed. A language of shared outputs may prove useful in creating a team spirit, and reassuring shareholders.
And, what does success look like? Achieving specified objectives, in a safe environment and with a sustainable model, which can be adapted for future projects. This is no mean feat; given the complexity of the sector, no one size fits all.
Whilst there is a lot of conversation about these different approaches to funding, there is little evidence out there of successful models that are used repeatedly. We have to work across the industry and with our partners to share expertise and create these sustainable investment models.
Do get in touch with us if you have enjoyed this article series and would like to discuss the challenges and opportunities posed by future mobility: changing consumer habits, working agilely, innovating in a safety-critical environment or exploring alternative sources of funding in a changing world.
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In the Sector and Service part of the website, relevant regional contacts have been identified.
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