Network Rail Chief Higgins Poised To Quit

By Mark Kleinman, City Editor

Network Rail is kicking off a hunt for a successor to its chief executive as it finds itself embroiled in a fresh row over punctuality targets and executive bonuses.

Sky News has learned that Sir David Higgins, who has served as chief executive only since February 2011, is planning to step down within the next year, after the transition to Network Rail five-year control period takes place in spring 2014.

His exact departure date has not been finalised, although insiders said the search for his replacement was underway and that a headhunting firm would be appointed imminently to oversee it.

It will mean a new leader of the company responsible for the UK's tracks, signals and stations at a crucial time in its history.

According to one person close to the situation, Richard Parry-Jones, Network Rail's chairman, had asked Sir David to commit to the role for the bulk of the next funding period, which he declined to do. The chief executive then agreed with the board that he would make way for a successor.

"It is an entirely amicable departure," said an insider.

Sir David originally joined the board of Network Rail as a non-executive director in April 2010, having run the Olympic Delivery Authority – the body responsible for staging last year's London Olympics – from its creation until the beginning of 2011.

Network Rail is overseen by the Office of Rail Regulation (ORR) and is structured as a private company limited by guarantee, but with some of its income delivered through grants from the Government. It is also a not-for-dividend company in that its profits are either reinvested in the railway or handed back to the Government

The ORR has set a punctuality target for the 2014-19 control period of 92.5pc of all trains arriving on time and with no operators achieving below 90pc. A final spending settlement, likely to be in the region of £37bn, will be agreed with the regulator later this year.

Network Rail has dozens of public members who act like shareholders in a quoted company although they have no direct financial interest in it. It partly funds its capital expenditure plans by raising debt in the bond markets..

Sir David's tenure has been dogged by angry exchanges about executive pay. It emerged last week that Network Rail's five executive directors could receive a combined total of more than £11.1m over the next few years if they meet performance targets. Unions have criticised the potential pay-outs as "rewards for failure".

At its annual meeting earlier this month, Network Rail defended the rewards, saying: "If exceptional performance is achieved – that is, if Network Rail delivers savings to the taxpayer of at least £450m, raises train punctuality to the highest levels ever seen in this country while delivering a massive programme of capacity-boosting projects ahead of time and under budget – then the hypothetical maximum pay-out for the company's executive directors would be just over £2m in total."

"However, as this year has demonstrated, there is no reward for failing to meet targets and underperformance in any one or more element will result in lower payments."

Sir David stands to make up to 100% of his £577,000 annual salary under a long-term incentive plan paying out in April 2015, although sources said he would relinquish any right to a pay-out assuming he does leave Network Rail before that date.

Among the possible internal successors to Sir David would be Robin Gisby, managing director of network operations, and Simon Kirby, managing director of infrastructure projects, although Mr Parry-Jones may opt to appoint an external candidate.

The new chief executive will take over at a time of major expansion on Britain's rail network, with projects such as Crossrail and the controversial High Speed 2 under development.

Network Rail has said publicly that it will not meet punctuality targets for long-distance services for the current five-year funding period which ends in March next year, making the achievement of the targets a key challenge for Sir David's successor.

A spokesman for Network Rail, which took on responsibility for Britain's railways from the discredited Railtrack in 2002, declined to comment.

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