TfL has outlined how much support it will need from the government if it is to keep running services after the current bailout expired in October.

Before the lockdown, the London Underground was on target to make an operating surplus of over £1 billion a year, while the rest of the network broke even. Although buses run at a significant subsidy, they do carry nearly double the number of passengers that the tube carries.

Although services have nearly returned to normal, passenger numbers are still massively down on usual and even lower than had been expected once the lockdown lifted. This is leaving TfL with the double hit of less income, but also thanks to the pandemic, increased costs of around £85 million so far.

At the peak of the pandemic, TfL was losing £80 million a week, although that has improved as the lockdown eased.

However, income is expected to be worse than originally budgeted for in the second half of this financial year, by some £800 million, due to a combination of lower revenues, reduced business rates and higher costs from street changes to improve social distancing and cycling.

There are also some higher costs in H2 due to delays in maintenance work during the height of the lockdown that now needs to be carried out.

Some of the ongoing projects that will continue include the Northern line extension and Bank tube station upgrades on the tube, and the Barking Riverside extension of the London Overground.

Some of the schemes which are now dependent on additional funding, include some of the step-free access upgrades, a new entrance at Stratford station, Piccadilly line resignalling and replacing the Bakerloo line trains.

The South Kensington station upgrade has also been paused, as the construction company tenders exceeded the budget allowed for them.

The bailout agreed earlier this year saw TfL granted £1.9 billion in May 2020, in the form of a £1.1 billion initial, £500 million loan package and a further £300 million contingency. TfL now expects to use £1.5 billion of the £1.6 billion available until October 2020 and does not need to use the £300 million contingency fund.

In normal times, TfL keeps a minimum of two months operating costs as cash which equates to £1.2 billion, which cannot be touched. Above this, TfL targets holding another £600m buffer for known risks, which can be spent if necessary.

The emergency budget originally expected to need £3.2 billion in funding for the full financial year, but their revised budget is now seeking £3.5 billion for the full year – an additional £2 billion to keep the services running from the middle of October to the end of March next year. The increase is largely due to higher costs and some deferred maintenance works.

The big unknown is when things will return to relative levels of normality, with a relaxing of social distancing expected by November, and if that encourages an increase in travel, but also if there will be a second lockdown this winter.

Looking ahead to next financial year (2021/22), TfL expects that even if passenger numbers return to 80% of pre-covid numbers, they will still need an additional £2.9 billion to keep services operating due to declines in other commercial income and business rates.

That assumes no more borrowing is allowed – as TfL is already pretty much maxed out there, and that they dip into their reserves while maintaining the £1.2 billion cash float untouched.

All this excludes Crossrail.

The current bailout was only enough to keep TfL running until 17th October 2020, so they expect to start discussions with the government about a further bailout in September — that’s ahead of the expected dual reviews into TfL’s finances.

There may also be further bailouts needed, as the uncertainty about how society recovers from the pandemic is leaving some very large variances in the financial projections.

Also, long term projects deemed to be at risk unless funding can be found include the Bakerloo line extension, the DLR to Thamesmead, the West London Overground line, and Crossrail 2.

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9 comments on “TfL needs an additional £2 billion to keep running until next April
  1. Maurice Reed says:

    Central government cannot sit back and watch London Transport go bust. Passenger numbers will increase in time but whether they reach previous levels is doubtful. I think we will be seeing many people continuing to work from home. Company offices in and around central London will most likely run with fewer in-office staff.

  2. GT says:

    Maurice Reed
    Unfortunately, that’s exactly what the current “government” can do – & then do their best to pin the blame on S Khan.
    There’s some serious-level politics being played here, with some unbelievably childish, spiteful & petty behaviour – from both sides, may I add, not just the government’s, though that is much more the obvious case.
    If TfL fold, then the government can turn their ideologues loose, which will include the break-up of any unified transport structure for London, & “competing” services, especially in the bus area …
    Not a pleasant prospect, is it?

  3. Melvyn says:

    And while this is going on I picked up the August issue of Modern Railways today which contains an article on progress being made to transfer Great Northern Inner Suburban services from Moorgate to TFL control something that looks likes a parallel world to the above ongoing crisis!

    We have Transport Secretary Grant Shapps going on about Mayor Khans 4 years TFL fares freeze ( which is wrong) yet Government has frozen fuel duty for road users for a decade !

    Admittedly Sadiq Khan got it wrong when lockdown was announced as that’s when he should have challenged the Government on how TFL would be funded without fares due to a decision by Government and why London TFL railways should be treated differently from Network Rail which has received billions in subsidies and Network Rail has even been able to progress more schemes during lull in passengers while TFL is forced to cut back !

    Perhaps it’s time to shut the tube if funding isn’t forthcoming!

    London rejected Conservative candidate last time and I can’t see them accepting him anytime!

  4. Paul Donnelly says:

    TfL is agreat success and it would be foolish to reverse recent acquisitions. The Operational part must be retained as is. the key is to allow more Hybrid Public Partnerships to get more built.

    West London Hounslow to Brent Cross West and Cricklewood.

    Northern Heights – Ally Palace – Muswell Hill – Highgate -Crouch End- Stroud Green

    Upper Holloway to Camden Road to York Way

    The Edward Line – South Kensington – Hyde Park Corner – Bond St – Store St – Kings Cross Argyle Square- York Way – Camden Road – Kentish Town West – Upper Holloway

    Rickmansworth – Croxley – Watford – Bushey – St Albans- Hays Galleria – Welwyn Garden City

    It´s not a time to change Stategy or to suppress Ideas or impede external finance.

    The 3rd Way as set out in Geoffrey Demprunt´s ” Trainsian Economics.

    • ianvisits says:

      Geoffrey/Paul – stop pretending to be someone else. I am now banning you from commenting on this website as this is not the first time I have told you to stop using multiple different names.

  5. JP says:

    Roosevelt famously used the ahem oversupply of manpower to carve transcontinental arteries across the depressed US.
    The G20 chancellors are falling over themselves to hymn the praises of loans at such low interest rates, arguing that with ‘added value’ infrastructure projects practically pay for themselves.

    Therefore why not re-ignite these projects and virus, EU, Sino-American tensions/cold war be-gone!

    If it really is true that borrowing now is free, future generations will ask hard questions of us as to why we waited until loans and workforce cost more, until pandemics were more prevalent and until outside and vested interests chossed things up with ever greater ease and complexity.
    Loans or grants just to keep the great panjandrum running, of necessity point to the desperate need for expansion and improvements; of network, working practices and systems.

  6. Nicholas Lewis says:

    The stark reality is transport systems have become very expensive to operate across the UK and the lack of fares incomes lays bare the situation. Considerable subsidies will need to continue to be provided but its clear this is an inflexion point for public rail transport. Thus both National and Underground railway administrations need to look at why they cost so much and deal with the underlying causes mainly in ott Health & Safety measures. Furthermore if the new norm is less people in offices, certainly on a 9-5 cycle, this changes what is needed for rush hour which consumes considerable resources at great expense for a short period of time so getting a handle on what the new norm looks like is urgent. As i see it current assumptions are largely things will get back to what they were in due course – but will they?

  7. Chris Rogers says:

    Accepting it’s not going to be a quick fix, addressing the fact that more than 500 TfL staff earned in excess of £100,000 in 2018/19 might help.

    • James says:

      Considering that equals 50 million, even axing them entirely would barely scratch the surface of the issue.
      As the articles says they were losing 80 million a week.

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