Despite having its budget slashed by government, the Strategic Rail Authority is driving through plans to build brand new British stations. But where is it planning to get the money?
It was a depressing start to the year for anyone dependent on the rail sector for their daily crust. First, transport secretary Alistair Darling announced that he was going to cut the Strategic Rail Authority's budget by £312m over the next three years. Then came news of further delays to Thameslink 2000, a project that the rail industry now refers to as Thameslink 3000. This has left consultants, contractors and architects, who had expected a glut of work in the sector on the back of the government's 10-year transport plan, wondering what is next for the chop.

Industry observers have concluded that the gaping hole left in the SRA's budget over the next financial year will put a halt to large construction projects. But Jim Steer, the SRA's number two, and head of planning and strategy, could not agree less. He remains upbeat about the future of major construction projects.

Steer is particularly determined to build new stations, paid for by property deals with the private sector. One of the pioneer schemes will take place in Reading, where the SRA recently reached an agreement with the council to secure private sector funding for the redevelopment of the town's station. "We are hoping that that this will be the first of a new breed of rail property developments," he says. "Given the SRA's budget constraints, major station-building work can't be done unless we can set up entirely property-based deals."

The local authority has teamed up with landowners on a significant office and commercial development around the station.

"For us, Reading is a bottleneck," says Steer. "It needs expansion to accommodate the increased flow of trains coming through. The council is championing the effort to secure some private sector funding. We have set ourselves the target of sorting out that deal this year."

Perhaps more ambitiously, Steer has thrown down the gauntlet to the construction industry by announcing that he wants to launch an architectural competition for a new-build station. And he is hoping it will rise to the challenge: "Because we've got such a fine inheritance of Victorian stations, we've made a name for ourselves in these rather interesting rehabilitations, such as Liverpool Street," he says. "But what I'd like to see is some steps forward in completely new station design. There are some old stations in the country that are of little merit. They tend to get listed regardless, but there are some where we should really start again."

According to Steer, the stations at Rugby and Wakefield fall into this category.

"Rather than saying 'let's keep it as cheap and simple as we can', let's just see what we can do to create a really exciting building," he says. "That's something that the SRA is seriously thinking about moving forward. I'd be interested to know what the appetite would be for an architectural competition, and how the design community would respond."

Steer also has his eye on larger schemes, such as the redevelopments of Victoria, London Bridge and Euston stations in London. Before it went into administration, Railtrack developed masterplans for these projects, but the government never made a commitment to fund them.

If you were to travel by train, you’d be astounded by the number of building sites en route

Jim Steer, Strategic Rail Authority

"Any decisions made on the redevelopment of these stations will have to be closely interrelated with wider property development," says Steer. "If you look to the rail sector to provide a major upgrade of a major terminal, it tends to make such a large hole in the budget that it gets very difficult."

He admits that the authority is constrained by lack of money for capital investment over the next year, but he is adamant that there are other ways construction projects can be funded. "People assume that if the SRA can't fund it, it won't happen," he says. "But there are a number of alternatives in funding these schemes. The Welsh assembly and the Scottish parliament, for example, are saying that they will fund major projects. This is good news for the construction industry."

As examples of how this approach can work, he points to the redevelopment of Paddington Station, which was funded by airports operator BAA on the back of the Heathrow Express, and Liverpool Street Station, which was funded by the Broadgate development.

"We're pretty optimistic that we will find a way around the funding problem," he says. "Take the East London Underground Line. We have made a commitment in our strategic plan, and in our budget, to progress the scheme as a PFI via a special purpose vehicle."

Steer says that this £1.1bn project is ready to go. It has planning permission and backing from London mayor Ken Livingstone. "I think it is the perfect testbed for the special purpose vehicle, which is new to rail," he says. "It's got powers but is still subject to some small local legal wrangles – some local people are trying to block it. But we are spending on it. Preparatory work is under way, and we are working on procuring private finance."

He is also keen to stress the continuing importance of maintenance and renewal work on the rail network. Three years ago, the SRA's spend on infrastructure, maintenance and renewal was £2.8bn. It is now £5bn.

"The West Coast Main Line is a £10bn project," he says. "Most of the expenditure is on renewals. People think that sounds a bit dull, but we're spending well over £1bn a year on these renewals. Where's that money going? It's going into the contracting industry – electrical supply and track work, civil and structural work. For the construction industry, that stuff is just as valuable as major construction projects."

The SRA is expecting 30% growth in passenger numbers on the rail network between now and 2010. "You can't accommodate that without building things," says Steer. "We need new stations, and in some places we need new line capacity. It is still a very significant growth challenge."

Freight upgrade projects are also pulling in work for contractors. An £30m gauge enhancement project, from Felixstowe to London, and the rebuild of Ipswich tunnel, currently out to tender, both require major construction work. "There's a huge amount of stuff happening across the network," says Steer. "If you were to travel on the train, you would be astounded by the amount of building sites you would see en route. That is the picture right across the network. There is a very high level of spend, and I expect it to continue."

Despite his optimistic approach, Steer still has his work cut out trying to manage the SRA's new slimline budget. This is on top of the soaring cost of operating and maintaining the railways, which has increased nearly 50% over the past three years, from £6.1bn to £9bn.