Turkey has a railway network 6 times shorter than the EU average. Transportation in Turkey is dominated by the road transportation both in urban and rural areas. Insufficient railway system spoils the Turkish economy in terms of misallocation of resources and inefficient income distribution. The share of the railway investments from the budget is very low compared to the share for the motorway investments. Lack of adequate railway system causes social imbalance. Everyday, the lengths of the motorways are increased and coach-based transportation system makes citizens price inelastic. The increased car ownership requires priorities on building more roads that makes Turkey more dependent on foreign countries. Restructuring and reorganisation programmes are needed to improve railways. Thus, new legislation, new strategic management, improved technology and new control mechanisms are required. Most of the proposed schemes are based on the privatisation of railways. The critical issue is how effective can privatisation be in Turkish railway system. Thus, the first example of the railway privatisation -the British Railways (BR)- is analysed.BR was privatised in early 1990s by separating the infrastructure and the operating services held by the private sector. Basic aim was the renewal of the infrastructure and the creation of competition between different operators. This would increase the efficiency both for passenger and freight transportation. The expected advantages were to create competition that would benefit consumers, promote railway as the primary transportation, create opportunities for development and investment and protect the environment.Privatisation of BR is completed and the results have highly been criticised by different groups. Private sector concentrates on special areas, train tickets are expensive and there is an increase in train delays and accidents. It is argued that the competition, the basic aim of the privatisation, is not achieved by the operating services. Due to the short-term contracts, private sector avoids making any investment on technology and recruitment Railway privatisation is different from water, gas and electricity. BR case is found unsuccessful in achieving the expected advantages of privatisation. It is a good example for showing the expected gains and losses before privatlsmg the Turkish Railways. Railway transportation is advised to be provided by a single entity, preferably by the national authority for optimum efficiency.