Philip Haigh
After a dramatic General Election, a slowing of general business activity, Brexit confusion, the threat of further strike action and problems for rail freight all add up to an unpredictable future for the railways, says PHILIP HAIGH
The art of thrift.
A strong railway relies on a strong economy. And a strong economy needs a strong railway to move goods and ferry people to and from work - particularly into city centres, and especially London.
If you were hoping for certainty to follow from June 8’s General Election, you’ll be disappointed. A snap survey conducted by the Institute of Directors on the day the election result became clear showed business leaders reporting a dramatic drop in confidence.
Coupled with a report of the first fall in consumer spending for four years and a steep decline in retail footfall, and this points towards a rough time ahead. Stir into this mix reports of the service sector teetering on the edge of decline, and a slowing of general business activity.
This will have train operators worried. It should also have Chris Grayling worried, now that he’s been reappointed to the post of Secretary of State for Transport. The DfT has been as keen on strong bids for franchises as the train operators. You don’t win by being conservative or by taking a realistic view of the future. Neither side can afford to see spreadsheets turn red.
Figures released by the Office of Rail and Road towards the end of May provide little comfort and plenty of warning signs. Passenger journeys on the busiest part of the railway, the London and South East sector, were down by six million in 2016-17 compared with the year before (a drop of 0.5%). Overall there was still growth, but at 0.8% it was the lowest annual figure since 2009-10, when the country was in a recession.
Growth of 3.8% in long-distance journeys and 3.9% in the Regional Sector countered the fall in London and South East, but any tightening of household belts can be expected to gnaw at this growth.
The effect of the terrorist attacks in Manchester and London must also be considered. ‘Keep calm and carry on’ is a fine mantra, and I hope that people will not be deterred from travelling, but I will be surprised if those attacks do not harm passenger numbers.
Northern and TransPennine Express can claim ‘force majeure’ under the franchise deals, to cope with the effect of being unable to run trains into Manchester Victoria for the period the station was closed in the aftermath of May 22’s attack. It will be much harder for them to claim for the longer-term effect of fewer passengers travelling as a result of the attack. They can’t claim for the effect of a slowing economy, nor for fewer people taking leisure trips to visit friends, families or attractions.
The same can be said of Govia Thameslink Railway (GTR) and Southeastern at London Bridge. Strike action also counts as force majeure, but (again) I suspect the DfT will play hard-ball between GTR’s loss of income on strike days and the loss of income as an indirect result of strikes. However, if it plays too hard, it runs the risk of making rail franchises even less attractive to potential bidders, given that just two companies were interested in running South West Trains last year.
GTR’s figures do not look good. ORR reports a 6.6% fall in passenger numbers over JanuaryMarch 2017 (Q4 of 2016-17), compared with the corresponding quarter the year before. For the whole year, GTR numbers fell 1.9% (six million passengers), while South West Trains fell further - 3.2% (2.3 million passengers). SWT was not affected by strikes, but relies heavily on commuters and thus on the general state of London employment and the wider economy.
The indecisive election result and the weakening of the Government of which Grayling is a part has already led to the rail unions increasing their efforts to have drivercontrolled operation ditched, despite it being in daily use at GTR and despite Driver Only Operation being used across many train operators and London Underground. I suspect strikes will continue on GTR, Northern and Merseyrail, and that more strikes will come at any hint of similar change at other franchises.
The fundamentals of the arguments around having a driver controlling his train’s operation and a second crewman helping passengers (including selling tickets) have not changed. A train only needs a driver - the second person is important, useful, but not essential.
Meanwhile, Brexit continues to loom large over the country. Both major parties argued for it, but neither won a majority. This appears to be spurring them on, rather than making them wonder whether their lack of popular support has something to do with policy.
Brexit will affect our railways. Britain is about to start building HS2. We don’t have much experience in building high-speed railways, but the French do and are just about to open
“Everything points towards thin gruel, rather than a rich feast. Railway managers have become used to plenty in the years since privatisation. They may soon have to rediscover the skills their forebears honed in making do with little.”
new lines to Rennes and Bordeaux. Will Brexit block our using those skills to build HS2?
Brexit’s likely impact on rail freight is not known, but it’s hard to see how replacing free trade with tariffs to and from Europe, as our biggest trading partner, will boost international rail freight.
Once again, ORR’s latest figures paint a grim picture. International rail freight fell 9% in 2016-17 to 0.4 billion net tonne kilometres. In future, such traffic may need to be routed via bonded warehouses, which could add to the time and expense taken to move goods.
The same applies to lorries using Channel Tunnel shuttle trains. In 2016, 11% more lorries used Eurotunnel than the year before (1.6 million). But the first three months of 2017 witnessed a 1% reduction compared with the same months in 2016, while in May 2017 there were 3% more trucks than May 2016. This forms a mixed picture from which it is difficult to draw trends.
Leaving Europe will remove Britain’s influence on the standards that it produces, and will remove the need to implement them. This could have a positive effect, but might tempt Britain to propose its own modifications to equipment that meets European standards across a larger market and is therefore cheaper. Adding requirements specific to Britain will increase costs.
As Network Rail pushes Digital Railway, losing influence on the way Europe’s major manufacturers develop equipment may yet damage any long-term saving that the DR might bring. More certain is that Britain will lose access to European research money. Of course, DfT could replace this funding for UK companies, but if the economy is suffering then money will not come rail’s way.
Neither side of the Brexit debate can conclusively demonstrate the results of leaving or staying within the European Union, just as no one really knows the future effect of the economy on the railway.
Grayling’s DfT should provide a steer in July, when it is due to publish its High Level Output Specification (HLOS) that describes what it wants from the railway in England and Wales between 2019 and 2024. More importantly, a Statement of Funds Available (SoFA) should explain how much it’s prepared to pay, and this will provide very strong evidence of what DfT feels about the future. (The Scottish Government will do the same for Scotland.)
Everything points towards thin gruel, rather than a rich feast. Railway managers have become used to plenty in the years since privatisation. They may soon have to rediscover the skills their forebears honed in making do with little. In itself, that’s not a bad thing - it could result in a more efficient railway, although it’s likely to be painful along the way.
Much as I’d like to see a bigger and better railway, a move away from major upgrade schemes, in which Network Rail has a mixed record, could remove damaging headlines and pricey bills from the railway. It will not solve overcrowding, but it gives NR the chance to reform and be in a better position to improve the railway when money once more becomes available.