Could the railways cope with a sudden surge in demand?
The railways could cope but it depends on where the surge in demand is. If the demand is peak times on commuter routes into big cities, then no, it won't and isn't coping. If people started using the train more for the leisure trips like weekends and to go to the smaller towns/cities then yes, the railway would cope.
Everything depends on where the demand rises really. We are investing a lot into improving capacity (albeit not enough in the right areas but that is another topic) into our major cities etc. I think it's some of the longer distance ticket prices which can put people off. Unless you want a super restricted ticket and book 3 years in advance, rail fares can be really high which puts people off using trains.
There are too many variables I think to answer this question.
Are rail passengers continuing to rise ?
I will let you know in a few weeks when the 18/19 passenger number estimates are announced