Examining the impacts of capital investment in London’s Underground: A long-term analysis

The deferred repair of infrastructure is often a pressing issue since infrastructure failures can have severe economic consequences for both operators and users. Although the benefits of non-expansion capital spending are well-known within the industry, empirical validations of such benefits from an organisational perspective are relatively rare. This exploratory research seeks to understand the impact of non-expansion capital spending on demand-side measures and operating cost using 70 years of unique data from London Underground. The data was collected for this research, and is among the longest time series for metros available within the academic literature. We adopt an autoregressive distributed lag model and discuss implications in the context of industry practices, including analysis of the company’s history and London’s urban development and politics. The exploratory results suggest that a 10% annual growth in cumulative non-expansion capital spending is associated with, on average, 4%–5% annual growth in passenger demand. Additionally, investment’s overall impact on demand increases over time. The 2000s period of infrastructure public–private partnerships was also found to be associated with positive annual growth in operating cost and negative growth in passenger demand. These results highlight the importance of capital investment and the impact of local politics on rail organisations’ long-term financial health.