EXECUTIVE SUMMARY

INTRODUCTION

Definitions

Methodology

The UK Economy

Overview

Political Climate

Interest Rates

Inflation

Exchange Rates

Taxation

Consumer Demand

Output

Investment

Forecasts

Abbreviations

INDUSTRY STRUCTURE

Overview

Railtrack

Passenger Services

Freight Services

Infrastructure Services

Rolling Stock

MARKET SIZE

Market Overview and Trends, 1994-1998

Market Segmentation, 1994-1998

Factors Affecting Investment

Forecast Segmentation, 1999-2003

TOC INVESTMENT PROFILES

Overview

Anglia Railways

Cardiff Railway

Central Trains

Chiltern Railways

Connex South Central

Connex South Eastern

Gatwick Express

Great Eastern

Great North Eastern Railway

Great Western

Island Line

LTS Rail

Merseyrail Electrics

Midland Mainline

Northern Spirit

North Western Trains

ScotRail

Silverlink Train Services

South West Trains

Thameslink

Thames Trains

Virgin Cross Country

Virgin West Coast

Wales & West

West Anglia Great Northern

OTHER INVESTMENT PROFILES

Overview

Bristol and South Gloucestershire Rapid Transit

Centro

Channel Tunnel Rail Link

Docklands Light Rail

Greater Manchester PTE

Heathrow Express

London Underground

Overview

CrossRail

Croydon Tramlink

Merseytravel

Overview

Merseyside Rapid Transit

Nexus (Tyne & Wear PTE)

Northern Ireland Railways Company

Nottinghamshire County Council

Overview

Nottingham Express Transit

Railtrack

Overview

West Coast Main Line

Thameslink 2000

Strathclyde PTE

South Yorkshire PTE

West Yorkshire PTE

PRODUCTION

Overview

Critical Success Factors

INTERNATIONAL TRADE

Overview

Imports

Overview

Import Penetration

Implications For Importers

Exports

Trade Surplus (Deficit)

SUPPLIER INDUSTRY STRUCTURE

Overview

Supplier Profiles

Adtranz (ABB Daimler-Benz Transportation UK)

ALSTOM

AMEC

Amey

Balfour Beatty

British Steel

Jarvis

Racal Electronics

Siemens

Tarmac

Westinghouse Brake and Signal Holdings

MAGAZINES

TRADE ASSOCIATIONS AND REGULATORY AUTHORITIES

List of Tables

1 Economic Indicators On The UK Economy, 1990-1999

2 Railtrack's Income, By Source, 1997 And 1998

3 UK Passenger Rail Franchises Awarded, By Operator, Franchise Start Date And Length Of Franchise, As At October 1998

4 Privatisation Of BRIS, By Owner And Date Of Sale, 1996

5 UK Capital Investment In The Railways, 1994-1998

6 UK Capital Investment In The Railways, By Sector, 1994-1998

7 Forecast UK Capital Investment In The Railways, 1999-2003

8 Forecast UK Capital Investment In The Railways, By Sector, 1999-2003

9 Virgin West Coast Journey Times, 1998, 2002 And 2005

10 Proposed Greater Manchester PTA Metrolink Extensions, By Length And Estimated Cost

11 London Underground's Capital Expenditure, By Sector, 1994-1998

12 Merseytravel's Rail Service Capital Investment, 1997-1999

13 Forecast Expenditure By Tyne & Wear PTA And Nexus, By Type, 1999 And 2000

14 Northern Ireland Railways Company's Capital Expenditure, By Sector, 1998

15 Railtrack's Infrastructure Expenditure, By Type, 1997 And 1998

16 Railtrack's Forecast Renewal Investment, By Sector, 1999-2008

17 Railtrack's Forecast Enhancement Expenditure, By Sector, 1999-2008

18 Strathclyde PTE's Capital Expenditure, By Sector, 1996 And 1997

19 South Yorkshire PTE's Capital Expenditure, By Sector, 1994-1997

20 UK Production Of Railway And Tramway Vehicles And Equipment, 1994-1998

21 UK Production Of Railway And Tramway Vehicles And Equipment, By Sector, 1994-1998

22 UK Imports Of Railway And Tramway Vehicles And Equipment, 1994-1998

23 UK Imports Of Railway And Tramway Vehicles And Equipment, By Sector, 1994-1998

24 UK Import Penetration Of Railway And Tramway Vehicles And Equipment, 1994-1998

25 UK Exports Of Railway And Tramway Vehicles And Equipment, 1994-1998

26 UK Exports Of Railway And Tramway Vehicles And Equipment, By Sector, 1994-1998

27 UK Trade Surplus (Deficit) In Railway And Tramway Vehicles And Equipment, 1994-1998

28 UK Trade Surplus (Deficit) In Railway And Tramway Vehicles And Equipment, By Sector, 1994-1998

29 Financial Summary Of GEC ALSTHOM, 1993-1997

30 Turnover Of GEC ALSTHOM, By Geographical Destination, 1996 And 1997

31 Financial Summary Of AMEC, 1993-1997

32 Financial Summary Of AMEC, By Class Of Business, 1996 And 1997

33 AMEC's Turnover, By Region, 1996 And 1997

34 Financial Summary Of Amey, 1993-1997

35 Financial Summary Of Balfour Beatty, 1993-1997

36 Breakdown Of Balfour Beatty's Turnover, By Activity, 1997

37 Financial Summary Of British Steel, 1994-1998

38 Turnover Of British Steel, By Region, 1997 And 1998

39 Financial Summary Of Jarvis, 1993-1998

40 Financial Summary Of Racal Electronics, 1994-1998

41 Turnover Of Racal Electronics, By Division, 1997 And 1998

42 Financial Summary Of Siemens, 1993-1997

43 Financial Summary Of Tarmac, 1993-1997

44 Financial Summary Of Tarmac, By Type Of Business, 1996 And 1997

45 Financial Summary Of Westinghouse Brake And Signal Holdings, 1992-1996

46 Turnover Of Westinghouse Brake And Signal Holdings, By Region, 1995 And 1996

List of Diagrams

1 UK Capital Investment In The Railways, By Sector, 1994 And 1998

2 Forecast UK Capital Investment In The Railways, By Sector, 1999 And 2003

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EXECUTIVE SUMMARY

The Railways Act 1993 facilitated the privatisation of the UK railway industry, enabling the existing British Rail businesses to be transferred to the commercial sector to stimulate competition and increase investment in the sector.

Consequently, the three British Rail passenger services were divided into 25 train operating companies. The majority of British Rail's operational infrastructure was transferred to Railtrack in 1994 and the remaining British Rail businesses which were responsible for freight, telecommunications, rolling stock and infrastructure have been divided and sold to individual private sector companies. Privatisation of the UK railway industry was completed in February 1997 with the purchase of the last passenger rail franchise, ScotRail, by National Express Group.

The level of capital investment in UK railways has significantly increased since the completion of privatisation. In the two years prior to the completion of privatisation levels of investment declined to œ1.24 billion (ECU1.50 billion) in 1995, representing a fall of 51 percent compared with the level of investment in 1993. This decline in investment reflected the uncertainty in the railway industry during this period.

The first full year of operations for many of the new companies was 1997. Consequently, investment levels significantly increased as expenditure programmes, which were determined in franchise agreements, began to be executed and as work was undertaken by Railtrack, in compliance with its investment programme. The continued expenditure by the new train operating companies, Railtrack and other concerns is projected to stimulate capital investment levels in the UK railway industry further in 1998, to œ4.03 billion (ECU6.00 billion) at constant 1997 prices.

In addition to compliance with train operating company franchise commitments, MSI have identified a number of factors which affect the levels of capital investment in the UK railway industry. These include:

- the restructuring of the industry

- regulatory powers and enforcement

- the rejuvenation of rail freight

- sources of funding

- the creation of an integrated transport system

- length of passenger rail franchises

UK production of railway and tramway vehicles and equipment is projected to increase by 62 percent in real terms in 1998. The significant increase in UK production since 1996 has reflected the high levels of domestic demand in the UK railway sector. Indeed, UK railway suppliers have been manufacturing products to meet orders placed by the new rail businesses since privatisation.

In order to achieve success in the market, suppliers to the UK railway industry have to consider a number of factors including the possession of a high degree of knowledge regarding the railway sector. This applies to technical expertise, product knowledge and to other areas, such as procedures followed in the bidding process of contracts.

During 1997 UK imports of railway and tramway vehicles and equipment rose by 20 percent. MSI project that the level of imports will increase significantly in 1998 to œ533.0 million (ECU794.2 million) at constant 1997 prices. MSI believe that the increase in import levels reflects the higher levels of capital investment in the UK railway industry since the completion of privatisation. Indeed, MSI believe that a significant number of importers have penetrated the UK railway industry to benefit from the upturn in the sector.

Prior to the privatisation of the UK railway industry, and initially after the restructuring of the sector, the number of new orders was particularly low. This resulted in intense competition for the limited number of contracts available. Consequently, several manufacturing facilities were forced to close. During this period the UK railway supply industry became relatively concentrated.

As the UK railway industry has become established since its restructuring, the number of suppliers of products and services has increased as companies have penetrated the market to benefit from the high growth rates. Indeed, a number of civil engineering companies have diversified into the rail engineering sector.

Text © 1998 MSI

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Last updated by Duncan Nottage 5th March 1999