Izzy Morris
Nottingham Trams Limited has reported just over £57m in losses for the last financial year ending March 2023, which more than doubles figures from 2022 (£20m). This is despite seeing increases in passenger’s journeys, jumping from 9.1m to 14.4m, and a £8.3m increase in turnover.
However Tim Hesketh, CEO of Nottingham Trams Limited’s parent company Tramlink, has indicated that the reasons for these losses are now ‘ancient history’, expressing confidence for the next financial year, which will end in March 2024.
£26m of the loss has been attributed to what is known as an impairment review, wherein a company’s assets are evaluated and forecasted in terms of their value. The most recent review saw a significant impairment, meaning that the review acknowledged a diminishing value, quality and strength in the tram system, indicating a forecast for Nottingham Tram systems of further losses, due to significant economic changes in the market, and due to current financial difficulties.
A significant drop in passengers
In effect, a significant portion of this £57m figure is actually related to an impairment charge within the company’s accounts, which comes about largely due to a significant drop in passengers, at 20%. As Hesketh went on to explain to Nottingham, the network is ‘making less than we predicted when [they] started out in 2011’, which is why this charge can be seen in their accounts.
As is the case in many sectors, the tram network was hit particularly hard by the pandemic. Due to transmission concerns, the network saw a significant reduction in passenger journeys taken, particularly over the lockdown period, where government advice asserted that only essential journeys should be made.
Jobs are becoming either remote or hybrid
Coming out of the pandemic, the number of people using public transport services has slowly increased, but is still 20-30% lower than pre-pandemic levels. One of the biggest reasons for this drop is the fact that many jobs are becoming either remote or hybrid, reflecting changes made during the pandemic to reduce contact between employees that could potentially transmit infections. In January/February 2020, reporting suggested that only 5.7% of workers did so remotely, but as of May 2023, 39% of workers in Great Britain had worked from home at some point in the last 7 days.
There may also be some residual health concerns about taking the public transport. The pandemic reminded people of how easy diseases can transmit between people, and with new strains of Covid-19 continuing to pose risks, there continue to be concerns from some residents. The impairment of assets is therefore partly a reflection of the post-pandemic world and the changing attitudes in relation to public transport, translating into fewer passengers.
Energy costs for the tram network have risen
Another factor that has been assessed as a major financial problem for the network is the rising energy costs. Scarcity of resources and rising costs in the international wholesale energy market have been cited as key causes for high energy costs, with events such as Russia’s invasion and ongoing conflict with Ukraine having significant impacts across the UK, felt also in the costs of running trams in Nottingham. Energy costs for the tram network have risen from £3.5m to £6m since the invasion.
However, Hesketh and Tramlink seem confident that they will be in a better position come March 2024, as a result of major financial restructuring which saw the company renegotiate the terms of its loans, extending the repayment time, reflecting the setbacks posed by the pandemic.
Last year, fare evaders cost the network £2m in revenue
Nottingham Express Transit have also just launched a zero tolerance campaign towards fare evasion, which should see an increase in the number of penalties given out to those that are caught using the tram without paying for a ticket, in turn reducing losses. Last year, fare evaders cost the network £2m in revenue. While there is still cause for concern, the next financial year will yield insightful results on the future of the network.
Despite a challenging summer which saw almost one in 10 trams not running as scheduled, and new threats such as major flooding in the city, it would appear there is still hope for something of a recovery.
Izzy Morris
Featured image courtesy of Tapio Haaja via Unsplash. Image license found here. No changes were made to this image.
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