Network Rail has to balance safefty and scheduling

In the year to late March, Network Rail lost �290m, compared with a profit of �295m made by its predecessor, Railtrack, a year earlier.

And its debt ballooned to �9.4bn, from �6.3bn under Railtrack.

But Network Rail, which bought Railtrack's network last October, said it had increased spending on track maintenance by one-third, to �1.2bn.

Network Rail's optimism is hedged about with endless caveats The good and bad news about Network Rail's finances

This investment, the firm said, is already paying off in terms of improvements in safety and train-time performance.

"It was a year in which the first steps were taken to address the difficulties of the past," said Ian McAllister, chairman of the company.

"It will take several years, but our goal is to build a rail infrastructure which will demonstrate sustainable improvement in performance at an acceptable cost to the nation."

'Fragile'

Network Rail was at pains to stress that its results are no clear indication of the financial health of the UK rail network.

The results cap a terrible 12 months for the industry: In May last year, seven people were killed in a train crash at Potters Bar - an incident that resulted in renewed calls for tighter rail safety.

Network Rail is under pressure to demonstrate that it is upgrading Britain's elderly track infrastructure, but also has to minimise disruption to services.

The company said that previous pressure to expand the rail network, combined with minimal investment, had resulted in a rail system that was "fragile".

The outlook, Network Rail said, was uncertain - not least because it is awaiting a regulatory review of the crucial West Coast mainline, which could result in heavy payments to Virgin, the main rail operator.