The Railway and its supply chain

It was a pleasure to be invited to the Railway Industry Association (RIA) annual conference. This was a great opportunity to hear of emerging policies and thoughts of the customer base, government, regulator, Network Rail (NR), and the train companies.

An opening address by RIA Chief Executive Darren Caplan, spoke of many concerns. The scrapping of HS2 Phase 2 is a huge disappointment and questions are being asked about what could have been done to prevent this. Unsurprisingly, HS2 featured in other presentations which mentioned the constant specification changes with consequential rising costs. A strong plea was made not to sell off the acquired land as the project needed to be re-assessed.

Beyond that, 54% of suppliers think the industry will contract due to the uncertainty about future projects. With no new rolling stock orders for over 1,000 days train builders are seriously concerned for the future of their factories. Yet despite strikes and poor performance, passenger numbers are increasing with leisure travel on some routes exceeding pre-Covid levels.

Promoting rail is vital and everyone involved in the industry should be engaging in this. RIA will fight for a better rail hearing and will be lobbying strongly at the general election next year. There is a need for rail reform and establishing Great British Railways must be a priority.

Political thinking

It was perhaps brave of Rail Minister Huw Merriman MP to address the gathering. Explaining the cost escalation and weakened business case were the prime reasons for scrapping Phase 2 (e.g. Euston’s cost rising from £2.6 billion to £4.8 billion), he reminded everyone of the benefits from the 140 miles of Phase 1 that will be delivered.

The money saved is to be spent primarily on Network North which will benefit every region with the North being earmarked for £20 billion and the Midlands £10 billion. The intended projects include:

• Electrification of the North Wales Coast line through to Hull.
• Sheffield to Manchester and Leeds to be electrified.
• Improved rail connections and a new station for Bradford.
• A £2.5 billion provision of a metro system in Leeds.
• The Midlands Hub including eastwards connections costing £1.7 billion.
• Remodelling of junctions at Ely to improve freight flow.
• Putting passengers and freight customers at the heart of policy will be the priority. Rail must meet the needs and work patterns of the population.

This brought some good news out of the cancellation of HS2, and one can only hope that the projects will proceed.

In contrast, the shadow minister of transport, Stephen Morgan, MP for Portsmouth South, gave credit to the dedication of people working in the rail sector and the railway’s huge social value. If elected, he said, the Labour party will concentrate on tackling regional economics, environmental issues, and the provision of a single guiding mind for rail. The HS2 decision represents a huge loss to taxpayers of sunk investment. Yet it needs to be understood why the project was costing so much more than comparable lines in other countries.

There is a need to transform rail investment as the decision time to proceed with infrastructure projects is now typically four and a half years, 65% longer than it took in 2012. Renationalisation is now Labour policy (Rail Engineer notes that NR and almost all train operators are already government controlled). The ambitions of Northern Powerhouse Rail will be broadly accepted by a Labour government.

Regulation, finance, and rail Reform

John Larkinson, the ORR’s CEO confirmed that in CP7 (2024-29) NR will receive £43.1 billion for operations, maintenance, and renewal. The ORR’s train performance targets are more challenging than NR wanted, but cancellations must be reduced. Efficiency targets of £3.2 billion in England & Wales and £410 million in Scotland must be achieved.

Renewals expenditure will be lower than CP6 but maintenance spend will be higher. Hence service affecting failures are forecast to increase by an average of 5%. The overall financial position is unlikely to improve in the short term. The DfT is to put new revenue incentives to the TOCs, and industry processes must be simplified.

Questions on the adoption of digital signalling indicated that NR needs a more proactive approach. It also needs to consider how it will replace GSM-R radio with the new Future Rail Mobile Communication System (FRMCS).

Andrew Haines, Network Rail’s chief executive and Great British Railways (GBR) transition team lead, considered that the contractual split between track and train involves too many complications. Yet the recent King’s speech at the opening of parliament only offered a draft Rail Reform Bill to get GBR established, indicating that it remains an inconclusive objective.

ORR funding, at £6 billion per annum, is a measure of confidence in the industry and must be spent wisely to offer good value. NR must get better at conveying its intent to suppliers. The important drivers are:

• Maintaining safety performance.
• Understanding the risk of climate change to train operation and performance.
• Achieving a more reliable and guaranteed performance to passenger and freight customers.

Some delayed renewals expenditure will increase failures, but renewals must be targeted for best results. An example of this is the Reading Paddington corridor where the London end becomes part of a metro operation for which the route is not really equipped. The introduction of digital signalling must be speeded up with the north of the WCML being an obvious deployment. As to capacity, the cancellation of HS2 phase 2 will mean high speed trains replacing an equal number of existing trains on the WCML north of Lichfield.

From the GBR transition team, Rufus Boyd, commented that railways must be able to adapt. GBR must give collective control, but cities remain the key driver for economic growth and should determine solutions for their areas. Opening new lines (e.g. Okehampton and Borders) are examples of localised growth. Passenger demand is problematic, but it is growing, particularly for leisure travel.

With significant amounts spent on infrastructure, contractor engagement needs to change. A less fractious relationship requires focussing on outputs rather than inputs. The relationship between NR and SE Trains needs to happen elsewhere. GBR has to provide the single guiding mind that is needed to overcome the huge subsidy problem (£4 billion a year; much more than in 2019) The supply chain also wants certainty in continuity of work and transparency on future projects.

This point was emphasised by Colette Carroll, managing director of transportation at AtkinsRéalis who feels that an unpredictable pipeline of work makes it difficult to make the case for investment. There was also no proper focus for the £2 billion R&D investment across the supply chain.

Rail suffers from uncoordinated inertia and complexity which makes projects difficult to deliver. TfL projects in London happen because there is basically one person in charge – the Mayor, with TfL as an informed client, which emphasises the need for a guiding mind.

Testing and research are also needed. Andrew Johnson from the Global Centre for Rail Excellence (GCRE) emphasised the need for this new test centre in South Wales to test infrastructure and rolling stock in controlled real world conditions. The 7km electrified test loop will allow open access facilities to global manufacturers and down to SMEs. There will be a tiered membership arrangement with innovative commercial partnerships.

Passenger expectations

Train Operating Companies (TOCs) are judged by the experience they offer. Claire Mann, South Western Railway’s managing director, knows that reliability is key. Operating 1,600 trains per day with 4,000 employees, the post-Covid situation is challenging with Waterloo’s peak time passenger numbers being 58% of those in 2019, though weekend travel is busier. Strikes over Driver Only Operation and trying to run too many trains led to a poor service.

Problems between Woking and Waterloo affect the entire network. Running fewer trains has improved reliability, but crowding is now a challenge. The Class 455 suburban trains are ageing and it takes too long to get the replacement trains into service.

All of this demands a culture aligned with customer expectations. A series of workshops aimed at attitude, inclusivity, and culture have been run and new recruitment methods devised. Such initiatives have been successful in keeping people upbeat, with low sickness levels and no TOC specific industrial action for 20 months. With improved performance, customers are more tolerant of bad days. Initiatives such as charity/community partnerships and defibrillators at every station have also helped the cause. Yet there is a need to find ways of delivering services more efficiently.

Referring to the recent Portsmouth line blockade, Claire said this was for essential work, but that bus substitution is both unpopular and difficult to provide. With weekend travel now buoyant, maybe blockades during the week will be tried out.

Steve White, managing director of Southeastern Railway, emphasised the need to align track and train interests. A deal to align the interests of the TOC with Network Rail (Kent) is already yielding positive outcomes. With a taxpayer subsidy of £1 million per day, the need for a more reliable and sustainable railway becomes increasingly urgent. The Class 465/6 fleet is over 30 years old and investment in new rolling stock is needed now.

London’s recently opened Elizabeth Line has transformed journeys from east to west of the Capital. The Northern Line extension to Battersea has been well received and the Piccadilly Line is getting digital signalling and new rolling stock. Stuart Harvey, TfL’s chief capital officer, indicated an ongoing investment spend of £26 billion. Increasing numbers of SMEs are engaged in this, many of which are outside London & the South East. A massive efficiency programme is needed, as well as big efforts to make the case for Crossrail 2 to link South West and North East London.

The commissioning of the next phase of East-West from Bicester to Bletchley / Milton Keynes will bring new journey opportunities. An upgraded Bletchley Bedford line will follow, with many level crossings eliminated. Beth West, the project team’s CEO, indicated the importance of regeneration in Bedford and the challenge of eventually reaching Cambridge for which the preferred route has now been decided.

Levelling up

Martin Tugwell, Transport for the North’s chief executive advised that a strategic transport plan will be published early in 2024 to show how rail could improve connections between the north’s major cities to unlock £118 billion of economic growth.

The tortuous experience of authorising projects is a real issue. For example, it took 10 years to define the Trans Pennine route upgrade. Manchester resilience projects and further WCML upgrades (required due to HS2’s cancellation) are now urgently required, for which local leaders need to agree investment priorities.

Vernon Everitt, Greater Manchester’s transport commissioner, said that the Manchester area is the country’s fastest growing region. The present rail network cannot support this and needs upgraded commuter lines. An integrated transport plan is needed with bus, tram, and local rail services having a single fares structure and ticketing. When asked about the congested Castlefield Corridor, it seems that a tunnelling solution is now favoured.

It is not just about the North, however. Rupert Clubb, chief officer at Transport for the South East, noted the need to improve rail services. Extending HS1 services to Hastings via Ashford, grade separation at East Croydon, and improving services to, from, and between Portsmouth and Southampton, were high on the agenda.

Marketing and customer needs

As obtaining information and buying tickets/reservations online is now the norm, organisations that provide these services need to understand what the customer really needs and make it easy for the customer to navigate. Mike Hyde, chief data officer at Trainline, considered that what precisely people are searching for is a question that needs to be researched. He felt that marketing UK train services to Europe and America is also important.

Martin Howell, director of transport markets, UK&I at Worldline observed that rail is an enabler of social mobility and economic growth. Open data access needs to be accelerated as well as growing the interest in rail and public transport for the upcoming generations. A controversial suggestion was free travel for under 18s to build a loyal customer base.

As a final contribution on marketing, Andy Bagnell, the chief executive of Rail Partners, said that commercial reform is essential. There is too much micro management from the DfT and companies need the commercial freedom to drive recovery by growing revenue in this high fixed cost industry.

Sustainability and pricing

Moving goods around the country is an enormous business and a logistical challenge. Maggie Smith, the director general of Rail Freight Group, asked if more goods could be moved by train if the commercial conditions were improved. The volatility of the market is a worry, and the decline of coal traffic forced the freight companies to chase new customers. Some businesses have plans for transferring to rail but often the response still echoes around the passenger priority. New freight depots have been opened and are trading successfully. Yet freight trains face increased access charges making profitability more difficult. The pricing regime needs to take this into account.

When questioned about why Freight Operating Companies (FOCs) are using diesel instead of electric locomotives due to energy prices, the response emphasised the cost issue. Although diesel is polluting, rail is much less so than the equivalent number of lorries. It is to be hoped that green technology will become a driver of behaviour.

Supplying the industry

Keeping the huge number of people employed in the rail industry gainfully employed is an ongoing challenge in these uncertain times.

Hitachi UK’s sales director, Nick Hughes, explained that his company has 13 facilities across the UK, contributing a total of £645 million gross value per annum. Some 286 Hitachi trains are now in service with more to come. These include HS1’s Class 395, Scotland’s Class 385, and the Class 8XX trains for GWR, LNER, and other long-distance operators. Hitachi supports 9,787 British jobs and is about to acquire Thales to make it one of the major signalling suppliers. The challenges ahead include:

• Continuity of work.
• The very large gap in new rolling stock orders.
• The need to move to green technology and battery train development.
• The future for the HS2 rolling stock contract.

Similar concerns were raised by Story Plant’s managing director, Emma Porter. On track plant machines have a typical 20-year life with many having a multi-million pounds cost. Yet often it’s not known where they will be deployed in the next 20 days and possessions are regularly cancelled without payment.

During the networking sessions, these concerns were mirrored by many other companies.

Export potential

RIA often organises trade missions to promote exports. Four speakers outlined various export opportunities. They all emphasised the importance of local knowledge and possible partnering with local companies to help understand the culture and commercial & legal frameworks. Export opportunities included:

Neil Walker, RIA’s exports director outlined opportunities in Ireland where €35 billion is about to be spent on transport including €7 billion for rail. This includes expanding the DART including electrification, signalling, and telecoms. RIA is to arrange a trade mission to Dublin in January 2024.

In Australia, David Camerlengo gave details of the $AU 57 billion expansion of the Sydney Metro. In Melbourne, $AU 30-34.5 billion is earmarked for a suburban rail loop including six underground stations. There is also work on a Melbourne to Brisbane freight corridor. The Australia UK free trade agreement should help British companies.

In Portugal, Helena Matos described 14 rail projects on a 1,000km route embracing rolling stock, ETCS and radio, and a new high speed line between Lisbon and Porto.

In Hong Kong there remains a shortage of skilled labour for expansion and renewal of the Mass Transit Railway (MTR). Corin Wilson from the DTI (UK), based in Hong Kong, would welcome British involvement.

HS2 and project certainty

Reference to the cancellation of HS2 northwards from Birmingham featured many times at this conference.

Sir John Thompson, HS2’s chair, advised that HS2 was not party to the cancellation decision which has profound implications for the rail sector. Focus will be maintained to deliver Phase 1 and its impressive civil works. 30,000 people are working on the project and there is an in house team for its integration with the existing railway.

The National Infrastructure Commission’s chairman, Sir John Armitt, was much more critical. The HS2 strategy is now in tatters and the decision is very disappointing. Even worse is the decision to sell off the acquired land. A new plan relating to the emerging situation must be created. The challenge is to make the best of Phase 1 as it must not be just a London to Birmingham link. Supplying trains suitable for the WCML northwards of Lichfield will be a key question, e.g. train length and whether to tilt.

The governance of HS2 has been badly handled and mirrors what happened on Crossrail when a two-year delay to the project was announced just two months before the declared opening date. The rail industry still tends to ‘gold plate’ projects. There is no point in spending on things that do not matter to the public. Much of the problem relates to politicians who do not listen to rail experts, only to the voters.

When planning the London Olympics, a press conference was held every four weeks, and all major projects should have this level of openness. The extension of HS2 to Euston cannot expect the private sector to bear all the cost. What confidence is there that other projects will go ahead? The Stonehenge Tunnel and the Lower Thames Crossing are examples of dithering. There are more requests for schemes than ever the finance will be available for. We can’t afford to keep getting projects wrong; the GW electrification over time and over budget did not help the case for ongoing electrification.

In summary

This conference covered a lot of ground and from it emerged the concerns of both suppliers and organisations anxious to see rail reform. The associated exhibition of suppliers gave hope that innovation in many areas is happening, particularly inside the SMEs. The overall message was the need for continuity of work particularly in the manufacture of rolling stock. Politically and with a general election only a year away, it seems that putting things on hold for that duration will be the likely outcome. One can only hope that the supply industry will be able to survive intact until more certainty is guaranteed. The cancellation of further stages of HS2 became an over-riding feature with an industry mindful that other project cancellations might follow. The next 12 months will be watched very closely.