Rail modernisation projects: Considerations for local authorities

Alex Madden, Head of Planning and Environmental and a member of the Rail team at Hugh James, looks at the key considerations affecting local authorities involved in rail modernisation projects, such as the Western Gateway Rail Deal.

On 28th of January, stakeholders from the private and public sectors gathered at law firm Hugh James’ office in central Cardiff to support the launch of the Western Gateway Rail Deal initiative.

The Rail Deal is led by the Western Gateway Partnership, a ‘cross border economic powerhouse partnership for South Wales and Western England’, and is made up of 28 local authorities, the city regions of Bristol, Cardiff, Gloucester and Swansea, Local Enterprise Partnerships and transport authorities in Wales and England, including Network Rail, Transport for Wales and the Welsh Government.

The success of the initiative, with £17bn in economic benefits potentially on the table, is a critical step towards improving transport efficiency, enhancing economic productivity, and meeting the UK’s legally binding net zero emissions targets. The £1.5 billion rail infrastructure upgrade will transform train travel in South Wales and the West of England, will stretch 150 miles from Pembrokeshire in the west to Wiltshire in the east, with a new rail crossing over the River Severn and up to 30 new stations.

Why does the Rail Deal matter?

The Rail Deal is all the more timely in the context of the recent UK Government acknowledgment of underfunding of the Wales network. Cardiff is ranked among the highest-growing cities in the UK according to the most recent Good Growth for Cities Index whilst the Centre for Cities declared in 2024 that Bristol was the strongest performer of all of the UK’s large cities. The Rail Deal has identified five key sectors of strength in the Western Gateway area: cyber and technology, advanced manufacturing and engineering, creative and digital, fintech and green energy.

The Rail Deal will therefore support the growth of these sectors and regions and, ultimately, the broader economy via the creation of the high speed and high-capacity connections needed to boost economic activity on the South Wales to London corridor.

The Rail Deal will also pave the way for development of further stations in Wales proposed as part of the recommendations of Lord Burns’ South East Wales Transport Commission (SEWTC) in 2020 and support the MetroWest Phase 1 and 2 and Cardiff Crossrail initiatives as the Western Gateway is well placed to co-ordinate the delivery integration policies between transport bodies and local authorities.

The previous government’s decision to divert HS2 funding to supporting local transport is encouraging but it is uncertain how much funding will be obtained from this source. The welcome development of Cardiff Parkway, recently granted planning permission by the Welsh Government, is using private sector funding; the company behind the project, Cardiff Parkway Development, is majority-owned by Investec with the Roberts family and the Welsh Government having a minority stake.

The Rail Deal has developed a long-term funding strategy which aims to diversify national funding sources whilst exploring local and private sector contributions. It will also align funding proposals with local growth strategies and provide essential certainty to local developers that the projects will be the ‘place to invest’.

Collaboration is key

Achieving these ambitious goals requires coordinated efforts between the public sector and private enterprises.

Bodies such as the Department for Transport (DfT), Office of Rail and Road (ORR), and the recently established Great British Railways will formulate the necessary policy and regulation.

Private companies will contribute innovation and investment, as we have seen with Cardiff Parkway. Digital rail solutions, hydrogen-powered trains, battery technology, and renewable energy integration all offer opportunities for the private sector.

The role of local councils and planning authorities will also be crucial, given their responsibility in integrating rail with local transport policies, their influence over planning approvals and land use and their role in securing funding or negotiating with developers and the private sector. Section 106 agreements, Community Infrastructure Levy (CIL) and compulsory purchase orders will of course form part of the tools at their disposal.

Local authorities will need to ensure that Rail Deal schemes in their area align with local housing, employment and industrial strategies, so their input is vital.

An example of successful collaboration was the development of Birmingham New Street, led by Birmingham City Council. An earlier scheme developed by the Strategic Rail Authority (SRA) had failed to maximise the wider economic development and regeneration potential that could be unlocked by the development and the collaboration with the council ensured that the revised scheme could act as a catalyst to the redevelopment of the city centre. Stations forming part of the Rail Deal will be able to move beyond their traditional transport function, integrating transport with direct development of the surrounding land for housing and retail purposes, supported by the high land values these sites will command.

Impact of rail reform: The Passenger Railway Services (Public Ownership) Act 2024

The Passenger Railway Services (Public Ownership) Act 2024 received Royal Assent in November 2024 and removes the presumption in favour of franchised passenger railway services being provided by the private sector across the UK.

The Act will allow train operators to be provided by a public sector company, primarily Great British Railways, when existing franchise contracts end or reach a contractual break point, intended to ensure an orderly transition to public ownership and avoid undue disruption to public services.

With railway services under public sector control, local authorities may find it more straightforward to collaborate with central government entities and other public sector bodies. The unified structure introduced by the Act may streamline decision-making processes and foster integrated planning for infrastructure projects. Public ownership could provide local authorities with greater input into service levels, station facilities, and network expansions within their jurisdictions, aligning rail services more closely with local needs and priorities.

Other considerations for local authorities

Traditional issues will remain relevant considerations for local authorities during the planning phase of the Rail Deal, such as judicial review, compliance with relevant planning and environmental legislation and procurement challenges. Other considerations relating to the Rail Deal will involve:

• The impact of the new procurement regime coming into force in February 2025: the Procurement Act 2023, set to come into force on 24 February 2025, introduces substantial reforms aimed at simplifying procurement, increasing transparency, and importantly, promoting social value in public sector contracts. Under the updated rules, contracting authorities must incorporate broader public benefits, such as sustainability and social value, into their decision-making processes. This shift presents an opportunity for local authorities to leverage procurement strategies to support their climate commitments, encourage green innovation, and foster economic growth in their regions. Local authorities must now also prepare for the onboarding process to the Central Digital Platform, ensuring that procurement processes for rail and transport projects remain efficient and legally compliant.
• Factors specific to development on or near railway infrastructure: the Rail Deal envisages the stations of the future moving beyond their traditional transport function into mixed-use development spaces. Direct development on land surrounding stations will require clear forward planning by local authorities and other stakeholders to ensure compliant procurement that allocate risk to the correct parties.
• Governance and accountability: the establishment of clear governance and accountability arrangements will be needed to ensure that the local authority achieves its objectives, manage its finances and maintains the trust of the local community it serves.
• Net Zero: ensuring development aligns with government policy and legislation on Net Zero. The Rail Deal describes itself as one that ‘champions decarbonisation’ via development that supports full grid decarbonisation and network electrification for both freight and passenger services.
• Devolution: the impact of the government’s ‘devolution revolution’ with areas given sweeping new powers to deliver growth, opportunities, transport and housing for local communities. The Rail Deal states that learning from the situation in Wales ‘should be considered’. 

Our current network simply does not deliver what is needed to satisfy both environmental targets and growing demand for services. By putting the region on the map for rail investment, the Rail Deal has received overwhelming support from local authorities, transport bodies, ministers and private sector partners.

Unfortunately, following last October's Budget, the UK Government announced its “minded to” decision to withdraw funding from all Pan-Regional Partnerships, including the Western Gateway, following a four-week consultation. A decision from UK Government is expected in the coming weeks.

With many of the critical industries of the future present in the region, the Western Gateway is a vital mechanism for unlocking and maximising opportunity and a key UK asset for both energy security and growth. It will be able to foster the strong partnerships needed to deliver the integrated planning and investment so that the UK can build a modern, efficient and green rail network capable of supporting the economic growth of the future.

Alex Madden is Head of Planning and Environmental and a member of the Rail team at Hugh James. If you have any queries relating to this article or any other legal issue that you would like to discuss, get in touch with Alex: This email address is being protected from spambots. You need JavaScript enabled to view it.

About Hugh James

Hugh James is a Top 100 UK law firm with more than 730 people operating from offices in Cardiff, London, Manchester, Southampton and Plymouth.

The firm’s Rail team provides legal expertise to the rail sector, supporting operators, franchisees, and the wider supply chain through an array of challenges, including relating to their operations; dispute resolution; procurement; commercial property; construction and projects; and workforce issues and projects. To find out more and get in touch, visit the website: Rail Legal Advice | Hugh James

The firm also has an extensive and long-established Public Sector practice, which advises more than 50 public sector clients, including the central government, local authorities, government-sponsored organisations, police forces and education and healthcare providers. The Public Sector practice comprises individuals drawn from the firm’s specialist teams, including: Property, Construction, Planning, Corporate and Commercial, Procurement, Banking, Employment and Pensions, Dispute Resolution, Safeguarding and Regulatory. To find out more and get in touch, visit the website: For Public & Third Sector | Hugh James