Created as a not-for-profit entity in 2002 (as a replacement for Railtrack PLC) and treated by the Office for National Statistics as a private entity, Network Rail found itself firmly back in the public sector last September as a result of a European accounting change, with increased government oversight and management. Frustrated with its performance and its cost to the Exchequer, there is now talk of privatisation. Meanwhile, two the four candidates for the Labour party leadership favour rail nationalisation.

Various forces - pressure on Network Rail to cut is costs and improve its performance, a move towards regionalisation, the desire of train operators for a more vertically integrated structure and suggestions that Network Rail should slim down its activities and focus on its core activity of maintaining and operating the track – could lead to some sort of restructuring or privatisation of Network Rail.

Privatisation could take various forms.  At its most extreme, the entire business could be sold.  In all likelihood, a new company would be formed and Networks Rail's assets and liabilities (or many of them) would be transferred to that business.  That business would then be sold and the sale proceeds paid to the Government.  Network Rail could then operate in the private sector as a regulated utility, rather like a water company.

The existing debt of GBP 34 billion would have a bearing on the value of Network Rail.  The market's preference would probably be for the debt to remain with the government.

An alternative option would be for concessions to be granted to (probably European) rail operators to run the network for a fixed duration (this is what Network Rail does on Highspeed 1).

A further option (which has been discussed in Whitehall) is to sell or outsource activities such as managing the major stations or the network operator's IT network.  Advocates would hope that the private sector would cut costs, improve performance and use the estate innovatively to generate extra revenue (for example, by selling or developing land).  They may do so but who would benefit from this?

The train operator's preferred option may be to split up the railway into vertically integrated franchises where they operate not only the trains but also the track.  Whether this means maintenance or maintenance and operations (e.g. timetabling and signaling) would have to be debated.

There are of course other options but in a highly regulated and contractual environment it is likely that any of the options will lead to significant legal complexity.  If the changes can be achieved contractually and the parties are willing to cooperate then the process (and the time taken) should be manageable, although not necessarily quick.  But if changes to UK legislation or opt outs from European legislation are required the road could be long and require a lot of political will to navigate.