Scotland brought ScotRail passenger services into public ownership in 2022. Four years later, the publicly owned operator is procuring at least 69 new suburban trains through a different model: an outside financier will fund the fleet, own it and lease the trains back to ScotRail for as long as 30 years, with an option to extend the arrangement for another five. The procurement documents also leave open the possibility of additional public funding changing that structure before the contracts are completed.
ScotRail is preparing to replace a large part of the train fleet used across central and southern Scotland. The new trains are intended for routes including East Kilbride, Fife, the Borders and Glasgow’s inner suburban network, with services to Motherwell, Larkhall, Lanark and Shotts among those expected to receive them.
The initial fleet will contain at least 69 trains, comprising conventional electric multiple units and battery-electric multiple units. ScotRail has retained options for as many as 37 additional trains, potentially taking the procurement to 106. The first are expected to enter service in the early 2030s.
The manufacturer will not necessarily own them. Neither, under the financing structure currently being procured, will ScotRail.
On 27 February 2026, ScotRail opened a separate procurement for what its contract notice calls a “financier / owner”. The successful bidder is expected to finance the manufacture of the fleet, purchase the trains and retain ownership of them. ScotRail will then lease the trains for operational use for a period of up to 30 years. The contract allows for a further five-year extension.
The proposed lease therefore has the potential to remain in force into the 2060s.
Scotland owns the railway operator, not necessarily the trains
ScotRail passenger services returned to public ownership on 1 April 2022 after the Scottish Government decided not to replace the previous Abellio franchise with another conventional private franchise. ScotRail Trains Limited is now owned through Scottish Rail Holdings, which is wholly owned by the Scottish Government.
More than 5,000 employees transferred into the new public operation. So did the contracts required to keep the railway running, including existing rolling-stock leases.
That produced an ownership structure less straightforward than the phrase “publicly owned railway” can suggest. ScotRail operates the passenger services. Network Rail owns and manages most of the railway infrastructure. The trains themselves can belong to separate companies and be supplied to the operator under long-term leases.
The new suburban procurement would continue that separation for a substantial part of the next generation of Scottish rolling stock.
The financier selected by ScotRail is expected to become a party to the agreement under which the trains are manufactured. It will finance payments to the manufacturer, acquire the completed fleet and lease the resulting assets to ScotRail. ScotRail will pay the owner under a rolling-stock lease.
The manufacturing contract and the financing contract are consequently being procured separately.
The trains themselves are being procured through another competition
ScotRail began the manufacturer procurement in November 2025. It covers the design, manufacture, testing, certification, commissioning and delivery of the new electric and battery-electric fleet.
The programme is intended to replace ageing trains as Scotland moves through a much larger fleet-renewal cycle. ScotRail said when it launched the procurement that approximately two-thirds of its trains would need replacing within 15 years.
Battery-electric trains form an important part of the plan because substantial parts of the Scottish railway remain unelectrified. A battery train can draw electricity from overhead wires where they exist, charge its batteries and then continue beyond the electrified network without relying upon diesel for the entire journey.
The procurement therefore sits within two long-term programmes at once: replacing ageing rolling stock and reducing the railway’s dependence upon diesel.
New trains are expected to provide level boarding, improved accessibility, air conditioning and additional accommodation for bicycles, wheelchairs and families. Those passenger improvements are being specified by the publicly owned operator. The capital asset delivering them is being financed through a structure in which another organisation would hold title to the trains.
Britain separated train ownership from train operation in the 1990s
The model has its origins in the restructuring of British Rail.
Before railway privatisation, British Rail operated passenger services and owned the trains used to provide them. The Railways Act 1993 broke that integrated structure into different components. Infrastructure, passenger operations, freight businesses and rolling stock were separated as the railway was prepared for privatisation.
Passenger trains were transferred into three rolling-stock companies, commonly known as ROSCOs. Those businesses owned fleets and leased them to the private train operating companies that subsequently won passenger franchises.
The arrangement solved a particular problem created by franchising. Passenger operators might hold contracts lasting only a limited number of years, while a train could remain in service for 30 or 40 years. Requiring each temporary franchise holder to purchase an entire fleet would have left it owning expensive assets long after its right to operate the service had expired.
A specialist rolling-stock owner could instead finance trains over their much longer economic lives and lease them successively to operators.
The ownership model survived subsequent changes to the railway.
Scotland has now changed the status of the operator without necessarily changing that part of the system. ScotRail can remain in public ownership indefinitely while continuing to lease rolling stock from companies whose investment horizons more closely resemble the life of the trains.
A 30-year lease changes the original logic
The new suburban procurement has an unusually long horizon when compared with the passenger franchises for which the leasing model originally developed. ScotRail is seeking a lease of up to 30 years, potentially extendable to 35.
The contract notice gives an anticipated start in April 2028 and an initial end in April 2058. The trains themselves are expected to begin entering passenger service in the early 2030s.
The length reflects the economics of new rolling stock. Manufacturing dozens of trains requires substantial capital before fare revenue is generated from their operation. Spreading financing across decades allows that capital cost to be recovered over much of the useful life of the fleet.
It also means that the financing decision now being made can shape Scotland’s railway long after the politicians, officials and executives responsible for the procurement have left office.
The question is therefore not simply whether leasing costs more or less than purchasing on the day the trains are delivered. The comparison involves the cost of capital, financing risk, maintenance responsibilities, residual value, flexibility, refinancing and what happens to the trains at the end of the agreement.
The Scottish Government is expected to stand behind the lease
The procurement contains another important financial feature. ScotRail anticipates that Transport Scotland will provide what is known as a Section 54 undertaking covering the 30-year lease period.
Section 54 of the Railways Act 1993 allows government to give undertakings relating to railway assets. In rolling-stock finance, such arrangements can reduce the risk that a train owner is left with specialised assets and no paying operator if the structure of passenger services changes before the financing has been recovered.
For an investor considering financing a fleet over three decades, the future identity of the train operator is otherwise a substantial uncertainty. Governments can reorganise services, change operators or alter the institutional structure of the railway many times during the life of a train.
The proposed undertaking gives the financing arrangement a relationship with the state extending beyond ScotRail’s ordinary commercial position as the company signing the lease.
The trains may be privately owned while the financing benefits from long-term public-sector support for their continued use.
Scotland is still considering other ways of putting money into the fleet
The procurement documents do not establish that every pound required for the 69 trains will ultimately come from the private financier.
ScotRail states that it, Scottish Rail Holdings and Scottish ministers are continuing to explore “complementary sources of funds” for the suburban fleet. If additional funding becomes available, the amount required from the financier could be reduced or the contractual arrangements amended.
The notice expressly allows the procurement and resulting agreements to be adapted to accommodate such investment.
That leaves the final capital structure open while the financier competition proceeds.
The government could therefore contribute public capital while an external organisation still owns and leases the fleet, depending upon the eventual terms. Alternatively, a sufficiently different funding arrangement could reduce the scale of private finance required.
The published notice does not state the final capital cost of the trains or the total lease payments ScotRail expects to make over 30 years. Those figures will depend upon the manufacturer selected, the fleet eventually ordered, financing terms and the outcome of negotiations.
Ownership determines who retains the asset at the end
A train is not consumed when a passenger buys a ticket. It is a long-lived capital asset capable of operating for decades and retaining value after its original financing costs have been recovered.
That residual value is one of the differences between buying and leasing.
If the state purchases a train outright, it carries the initial financing requirement and the risks associated with the asset, but it also owns whatever remains at the end of the period being considered. It can continue operating the train, refurbish it, transfer it, sell it or scrap it.
Under a conventional operating lease, ownership remains with the lessor. Lease payments purchase the right to use the asset under agreed conditions rather than title to it.
The economic comparison depends upon the complete contract rather than the purchase price alone. A private financier’s cost of capital, risk allocation, residual-value assumptions and required return all enter the lease price. Public borrowing has different financing characteristics but places capital expenditure and asset risk more directly upon the state.
The ScotRail procurement is designed to obtain competing offers from organisations capable of financing and owning the fleet. The eventual bids will determine the commercial terms available under that model.
The existing railway already contains several layers of ownership
Scotland’s railway cannot be divided neatly into public and private halves.
ScotRail Trains Limited is publicly owned. Scottish Rail Holdings is publicly owned. Transport Scotland is part of the Scottish Government. Network Rail, which owns most track, signalling and major railway infrastructure, is a public-sector body accountable to the UK Government.
Stations can involve different ownership and management arrangements. Freight services are commercially operated. Maintenance and construction work can be delivered by private contractors. Rolling stock can be leased from specialist owners.
When ScotRail entered public ownership in 2022, Transport Scotland’s mobilisation programme included the transfer of approximately 1,400 separate workstreams, among them existing rolling-stock leases. The change of operator therefore did not require the state to purchase the trains already providing ScotRail services.
The forthcoming fleet programme shows that this was not merely a transitional inheritance from Abellio. Leasing remains an active option for the next generation of rolling stock being commissioned by the public operator itself.
Scotland is already spending public money on trains it will not necessarily own
The relationship between public investment and private rolling-stock ownership can take several forms.
In March 2026, ScotRail announced that its ageing High Speed Trains would be replaced by 22 Class 222 trains supplied under a contract with Beacon. The trains are to undergo an £80 million overhaul and refurbishment before entering Scottish service, supported by £67 million of Scottish Government investment.
Beacon is a rolling-stock leasing company.
The arrangement demonstrates that public expenditure on a fleet does not by itself determine who holds legal ownership of the vehicles. Government can fund refurbishment, modifications, infrastructure or other costs associated with trains supplied under leasing arrangements.
The suburban procurement is larger and longer term because it concerns newly manufactured trains rather than an existing fleet being refurbished for another operator.
The battery trains will create another long-lived dependency
The inclusion of battery-electric trains adds another dimension to the financing period.
A railway vehicle may remain in service for several decades, but batteries do not necessarily have the same useful life as the vehicle containing them. Their performance changes through repeated charging cycles and technological standards can develop substantially during a 30-year operating period.
The manufacturer and support agreements therefore have to accommodate a fleet whose propulsion technology may require significant intervention during its life.
ScotRail’s separate manufacturer procurement includes a Technical Support and Spares Supply Agreement expected to last for at least 15 years and potentially as long as 35 years.
The next suburban fleet could consequently enter service with three long contractual relationships surrounding it: the public operator using the trains, the financier owning and leasing them, and the manufacturer supporting them.
Those relationships may survive for most of the working lives of the vehicles.
At least 69 trains could become 106
The initial order is a minimum rather than the maximum scale of the programme.
ScotRail has retained options for up to 37 additional trains. If every option were exercised, the fleet could reach 106 units.
The routes identified for the new trains cover a substantial part of the passenger railway around Glasgow and into Fife and the Borders. Their introduction will also interact with electrification projects because the mix of conventional electric and battery-electric trains depends partly upon which routes possess overhead wires when the fleet enters service.
Scotland is therefore making decisions about rolling stock and infrastructure together. Electrifying a railway changes the type of train required. Buying a battery train can allow diesel operation to end before every kilometre of a route has been wired. The economic case for each decision depends partly upon the other.
The ownership arrangement will sit underneath those engineering choices for decades.
The financing decision has not yet been completed
The financier procurement formally opened on 27 February. Applications closed on 10 April, after which ScotRail could select qualifying bidders to proceed into negotiation.
The manufacturer competition is running separately. The eventual owner is expected to become a party to the manufacture and supply agreement alongside ScotRail and the selected train builder.
The structure is therefore being assembled before a train exists.
A manufacturer will design and build the fleet. A financier will provide capital and take ownership. ScotRail will operate the trains. Scottish ministers are expected to provide a long-term undertaking supporting the lease arrangements. Additional public funding may still alter how much private finance is ultimately required.
When the first passengers board the new trains in the early 2030s, almost none of that structure will be visible. The trains will carry ScotRail branding and operate ScotRail services with ScotRail staff on a railway whose passenger operator has been publicly owned for more than a decade.
The ownership documents will tell a different story.
Under the procurement now under way, the company carrying Scotland’s passengers will belong to the Scottish public sector. The trains carrying them will belong to the financier selected to lease them to it.
Sources
ScotRail Suburban Fleet (EMU and BEMU) Financier Procurement
Public Contracts Scotland / ScotRail Trains Limited — 27 February 2026
https://www.publiccontractsscotland.gov.uk/Search/show/Search_View.aspx?ID=FEB550557
ScotRail Suburban Fleet (EMU and BEMU) Financier Procurement — Contract Notice
Find a Tender Service / ScotRail Trains Limited — 27 February 2026
https://www.find-tender.service.gov.uk/Notice/017792-2026
ScotRail Launches Finance Procurement Phase for New Trains
ScotRail — 27 February 2026
https://www.scotrail.co.uk/about-scotrail/news/scotrail-launches-finance-procurement-phase-new-trains-0
ScotRail Launches Procurement for New Train Fleet
ScotRail — 5 November 2025
https://www.scotrail.co.uk/about-scotrail/news/scotrail-launches-procurement-new-train-fleet
ScotRail Trains Limited and Caledonian Sleeper Limited
Transport Scotland — accessed September 2026
https://www.transport.gov.scot/public-transport/rail/scotrail-trains-limited-and-caledonian-sleeper-limited/
Scottish Government Will Take Over ScotRail Services on 1 April 2022
Transport Scotland — 9 February 2022
https://www.transport.gov.scot/news/scottish-government-will-take-over-scotrail-services-on-1st-april/
ScotRail Announces Plans to Replace High Speed Trains
ScotRail — 19 March 2026
