KN60074

KEY NOTE REPORT REVIEW : Railway Industry : May 2004

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This report covers: railway industry, passenger services, freight services, light rail industry, faltering growth in passenger market, declining demand for freight services, resurgence in urban rail systems, increasing investment, Changing Role of the Public Sector, Network Rail, Jarvis, Balfour Beatty, Carillion, rail services and the environment, Key trade associations, professional bodies, UK Trade Associations, Public/Private Partnerships, present and future schemes, foreign trade, safety, The Environment, impact of disability legislation, train warning and protection systems, automatic warning system, European Rail Traffic Management System, Maglev, the internet, outside suppliers/contractors, equipment manufacturers, rolling-stock leasing companies, (ROSCOs), Infrastructure Maintenance contractors, Vehicle Acceptance Bodies, Plant Acceptance Bodies,Train Engineering Service Companies, Train-Service Information Providers, Main Media Advertising, Exhibitions, Conferences and Trade Shows, freight operationg companies, rail freight group, new tramway developments, transport for London, Docklands Flight Railway, Rail Maintenance at Network Rail, Rail Maintenance at London Underground, Rolling-Stock Leasing Companies (ROSCOs), National Rail Contractors Group, Engineering Services and Equipment Companies,

Companies and Associations covered include: Network Rail, London Underground, Channel Tunnel Rail Link, Centre for Rail Skills, Heritage Railway Association, Railway Forum, Railway Industry Association, UK Professional Bodies, Institute of Logistics & Transport, Institution of Railway Operators, Engineering Institutions, L'Association Européenne pour le Développement du Transport Ferroviaire (AEDTF),Union Internationale des Chemins de Fer (UIC), Union des Industries Ferroviaires Européennes (UNIFE), English, Welsh & Scottish Railway, Great North Eastern Railway, South West Trains, West Coast Trains, ScotRail Railways, Great Western Trains Company, Arriva Trains Northern, South Central, North Western Trains Company, Eurostar, Eurotunnel, Strathclyde Passenger Transport, London Travelcard,Chiltern Railways, Network Rail, Eurotunnel, Channel Tunnel Rail Link, Train Operating Companies, Franchise Operators, Other Passenger Rail Services, Association of Train Operating Companies, National Express Group PLC, Qjump, Central Trains, Eurostar, FirstGroup, First Great Eastern, First Great Western, The Go-Ahead Group, Euro tunnel, Northern Ireland Railways Company, Freight liner, GB Railfreight, Light Rail Transit Association, Tyne & Wear Metro, Manchester Metrolink, Angel Trains, HSBC Rail, Porterbrook Leasing Company, Amey Rail, Bombardier Transportation, Jarvis Rail,Thames Water, WS Atkins,

TABLE OF CONTENTS

EXECUTIVE SUMMARY

Executive Summary In the year ending 31st March 2003, receipts from passenger and freight rail services in Great Britain totalled £5.59bn. In the same year, the market for contracted-out services and other products supplied to UK railway operators was worth an estimated £8.01bn — a figure that includes current expenditure and investment in track, signalling, stations, locomotives and other vehicles. The UK railway industry includes providers of infrastructure, operators of passenger and freight services on the national network, and operators of urban rail services.

The largest sector by far is passenger services on the national rail network, but London Underground and the freight operators also have significant market shares. Almost all railway systems in the UK have been affected by many years of underinvestment in vehicles and infrastructure, and many of the industry's current problems stem from this fact. Some observers take the view that the organisational framework governing the operations of the national railway network is also to blame for the industry's current malaise. For this reason, the Government has announced a review of the industry, which is expected to deal with the allocation of responsibilities between Network Rail, the Office of the Rail Regulator (ORR) and the Strategic Rail Authority (SRA).

Among the questions likely to be considered as part of this review is the extent to which the operation of the system is hampered by the fragmented nature of the current organisational structure. Should track and trains be brought back together and managed as part of a single organisation, possibly on a regional basis? Another question relates to the role of government ministers. Since large sums of public money are being spent on the rail infrastructure, even under a privatised regime, should the Government have greater powers to intervene in the operation of the railway system? In London, there is a parallel debate on the role of the public sector, with the Mayor of London having reluctantly accepted the public/private partnership for investment in London Underground.

The partnership provides for the upgrading and continuing maintenance of the Underground infrastructure by the private-sector operators Metronet and Tube Lines, at a cost of over £23bn over the next 15 years. The UK economy, and government finances in particular, are currently in a reasonably healthy state — certainly in comparison with many of the UK's overseas competitors. This means that the Chancellor is able to make a significant contribution to the programme of investment required to create a more efficient railway system. Particular sectors have problems specific to their area of the industry.

In the rail freight market, for example, the positive impact of economic growth has been overshadowed by other factors. Since the 1960s, the sector has had to contend with the competitive advantage enjoyed by road haulage — an advantage attributable to its flexibility and the fact that virtually all commercial and residential premises are directly linked to the road network, whereas few are directly connected to the rail network. As a consequence, in contrast to the recent resurgence in demand for passenger travel by rail, the rail freight market has continued to lose out to road transport. Another sector experiencing difficulties is the market for contracted-out services.

The infrastructure of the national railway system is controlled by Network Rail. Until October 2003, the major share of the maintenance of this infrastructure was contracted out to a number of specialist firms. However, following a number of highly publicised incidents involving accusations of poor workmanship, Network Rail has taken the decision to bring all such maintenance (although not renewals) in-house. Among the trends that are likely to have an impact on rail patronage in the future is the ageing nature of the UK population.

This will have implications for the passenger market, with commuter and business travel likely to be affected by a decline in the number of people of working age. The nature of the leisure-travel market will also change, with more attention having to be paid to the needs of the older sections of the population — already a significant proportion of travellers on some urban rail systems. The threat of terrorism has a potential impact not only on activity in the UK economy as a whole but also on business and leisure travel.

Transport systems are always near the top of the list of terrorist targets, and the UK railway system (which includes London Underground and the Channel Tunnel) might well be badly affected by any such threats. In the shorter term, changes to the train operators' franchise networks are likely to affect public perception of the railways. Several franchises are being redefined; a new Greater Anglia franchise will replace the existing Anglia, Great Eastern and West Anglia rail services, and consultation has begun on a new Integrated Kent Franchise, with the aim of integrating new high-speed domestic services using the Channel Tunnel Rail Link with existing services in the area from 2007.

Text © 2004Key Note

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