Skyrocketing Expenses: The High Price Tag on Germany's Ailing Railways
Expense Analysis: Estimated High Cost of State-Funded Railway Infrastructure Development
Let's take a closer look at the staggering costs associated with modernizing Germany's railway network. Sparking concern, a study conducted by the Ifo Institute's rail expert, Felix Berschin, reveals that expenses in the rail sector have skyrocketed - all whileconstruction costs remain relatively tame.
In recent years, the federal government has poured billions into the railway sector. Yet, this investment has mostly contributed to inflating construction and railway industry costs, rather than advancing the renovation of the rail network. This disturbing revelation comes courtesy of a recently publicized study by the "Tagesspiegel." The railway is currently lobbying for 148 billion euros from the federal government's infrastructure special fund - a staggering figure representing three quarters of the total sum.
Berschin's study dives into the railway's financial records, analyzing primary investments made in tracks, switches, bridges, and overhead lines between 2006 and 2024. The findings are striking: The amount invested has only risen by approximately 21% between 2011 and 2024. Yet, the federal government and DB InfraGO, the responsible DB subsidiary, have invested significantly more money for this in the past year compared to 2011.
"The prices for railway construction have almost doubled compared to road construction," Berschin informed the "Tagesspiegel." This trend is not attributable to post-pandemic or war-induced inflation in construction prices.
The study further highlights a concerning trend: the price of key components such as signaling technology and bridges spiked significantly as early as 2018. It's worth noting that this surge in spending coincides with politicians committing increased support for the railway sector in response to intensified climate protection debates. Prior to 2018, the prices for railway construction had only risen by 25% compared to 2010. Berschin suspects that these higher costs may indicate inflated industry margins, particularly in signaling technology, which has only two major providers in Germany: Siemens and Hitachi.
Sources: ntv.de, lme
- Deutsche Bahn
- Infrastructure Investments
- Construction Industry
- Ifo Institute
Insights:
- Increased Public Funding: Germany's federal government has provided unprecedented funding to the railway sector, which has contributed to inflating costs without significantly accelerating infrastructure renovation. This suggests that the additional funding is being diverted to higher industry costs rather than increased productivity or output.
- Price Inflation in Railway Construction: Prices for railway construction have doubled compared to road construction, making railway projects significantly more expensive.
- Limited Output Increase: In spite of the substantial investments, the physical output (e.g., track laid) has not increased proportionally. Between 2011 and 2024, the amount of infrastructure built only rose by about 21%, even though the investment was more than four times higher than in 2011.
- Industry Margins: There is speculation that the industry might have boosted its profit margins, capitalizing on the increased public funding without demonstrating corresponding improvements in efficiency or productivity.
- The Ifo Institute's study, conducted by rail expert Felix Berschin, reveals that increased public funding in Germany's railway sector has not significantly advanced infrastructure renovation, as construction and rail industry costs have inflated instead.
- Deutsche Bahn and DB InfraGO have invested a significant amount of money for railway construction in the past year compared to 2011, yet the amount invested has only increased by approximately 21% between 2011 and 2024.
- Berschin's study suggests that industry margins, particularly in signaling technology, may have been inflated due to the limited increase in output despite substantial investments.
- Prices for railway construction have almost doubled compared to road construction, and key components such as signaling technology and bridges saw significant price spikes as early as 2018, coinciding with increased political support for the railway sector in response to climate protection debates.
