2.3 The main driver of predicted revenue growth is increased passenger numbers. In the case of South Western, our analysis suggests that more than three quarters of the revenue growth predicted is related to volume growth. The balance comes from a variety of other sources including allowed ticket price changes (see paragraph 3.10), reduced fare evasion, electronic ticketing, station and car parking facilities.
2.4 Rail passenger volumes are already showing strong growth rates. Journeys grew around 7½ per cent in 2006-07, with revenue up by 12 per cent as a result.viii Recently-let franchises that are already operating reflect this acceleration, with growth ranging from 11 per cent (the lowest rate in a franchise) to 14 per cent (the highest rate in a franchise) for the first year. Growth rises in aggregate to 47 per cent (the lowest overall level in a franchise) to 62 per cent (highest overall level in a franchise) after five years, but it is difficult to identify how far capacity constraints, resulting in overcrowded services, may reduce some of this growth because franchise financial models do not treat crowding consistently.
2.5 The Department forecasts that total revenue for all train operating companies will rise from £5,000 million in 2007-08 to £7,440 million in 2013-14 (in 2006-07 prices) across all franchises. Train Operating Companies project higher growth, but if the volume growth in their bids does not materialise, the lower assessment in the Department's forecasts still shows subsidy reductions of about one third.
2.6 Continuing economic growth is an important variable in these revenue projections. For example, in one bid we examined, the expected impact of continued GDP growth was £830 million (net present value). Nevertheless, the direct impact on franchise revenue in any one year is limited. For example, if the assumed rate of GDP growth is halved, the effect on a single year is limited to two per cent of revenue.