How have rolling‑stock leasing companies (ROSCOs) profited from rail privatisation and how much have they invested in new trains?
Executive summary
Rolling‑stock leasing companies (ROSCOs) extracted sustained profits from the post‑1990s privatisation model by owning most passenger vehicles and charging operators lease rents that are now largely underwritten by government support, producing large dividend payouts in recent years while continuing to supply and sometimes finance new trains [1] [2] [3]. How much they have reinvested is disputed: industry and regulator data show ROSCOs financed significant new fleets and refurbishment projects, yet unions and campaigners point to large dividend streams — for example £409.7m of dividends in 2022–23 and £1.2bn paid 2012–18 — that, critics say, could instead have funded hundreds of new vehicles [2] [4].
1. The privatisation mechanism that created rent‑collecting owners
The structure of Britain’s rail privatisation deliberately separated ownership of rolling stock from train operators, concentrating nearly all passenger vehicles in three ROSCOs (Angel Trains, Eversholt, Porterbrook) that lease them back to operators under long contracts; that institutional design created recurring, non‑competitive revenue streams for ROSCOs because TOCs often need particular classes of trains only one ROSCO controls [5] [1] [6].
2. Profits and dividends: numbers that fuel the controversy
Financial and regulator sources show ROSCOs paid £409.7m in dividends in 2022–23 after a sharp rise from £122.3m the prior year, while an RMT tally states ROSCOs paid about £1.2bn in dividends between 2012 and 2018; campaigners point to specific distributions such as Angel Trains’ £75m dividend to overseas funds as emblematic of profit repatriation [2] [7] [4] [8].
3. Government support, risk socialisation, and why profits rose
During the pandemic the state effectively guaranteed lease revenues by propping up TOCs and paying subsidies that ensured ROSCOs continued to receive payments, a dynamic critics say socialised downside risk while leaving upside private — the government injected billions into the rail sector in 2020–22 and did not renegotiate lease payments, boosting ROSCO cash flows and enabling dividend payouts [3] [6] [2].
4. Investment record: ROSCOs as funders of new trains and refurbishments
Industry accounts and historical studies credit ROSCOs with providing major private capital for fleet renewal — underwriting orders such as the Desiro and Pendolino programmes and participating in refurbishments — and regulator registers show over 15,000 vehicles in use with substantial electrification and modernisation since privatisation, indicating ROSCOs have financed new build and upgrades [9] [10] [11].
5. The gap between claimed investment and opportunity cost
Despite those investments, trade unions and campaign groups argue ROSCO dividend policies constrained reinvestment: RMT calculates dividends between 2012–18 could have paid for around 700 new vehicles and cites rising average fleet age and earlier years where low purchase prices created highly profitable legacy leases [4] [1] [7]. The ORR and some industry voices counter that leasing has enabled the procurement of “thousands of new trains” without putting debt on public books and that some public procurements proved more expensive than leasing [2] [3].
6. Summary judgement: profit extraction alongside real, contested investment
The evidence shows ROSCOs have profited substantially from the privatisation design — large dividend flows, ownership concentration and favourable lease security have generated high margins and repatriated returns to overseas investors — while the same companies have also been a major source of capital for new fleets and refurbishment programmes; the debate hinges on policy choices about who should bear risk and whether dividends represent necessary investor returns or diverted capacity to renew rolling stock that might have been achieved under different ownership or financing models [2] [9] [4].