Rail recovery continues – but with £2bn annual revenue shortfall
ALTHOUGH there is a growing recovery in passenger numbers since the pandemic caused the Government to introduce harsh travel restrictions in March 2020, the way the railway network is being used has changed considerably.
Latest statistics show season ticket holders accounted for just 14.5% of journeys compared to 32.5% pre-Covid. These figures from the rail regulator also show that compared to three years ago 76% of user demand has returned, but reduced income from season tickets means the average fare paid has fallen by 7.6%.
There has been a greater recovery in demand for discretionary travel in the leisure market and it is notable that LNER carried more passengers (106%) than before the pandemic, with a similar recovery by the East Coast open access operators. The train operators in London and South East were less successful given the decline in peak hour travel.
The overall result is that there is an estimated current shortfall in annual revenue of £2 billion which has resulted in the demand from the Government for cost reduction measures which has seen the withdrawal of trains from the timetable and a substantial quantity of rolling stock sent for scrap. There has also been a drive for productivity by Network Rail to reduce infrastructure costs. On their own, these issues provide a challenging background for rail funding, but the war in Ukraine has brought added pressure, with a rise in energy costs that has resulted in inflation throughout the economy.
PAY DEMANDS
This has in turn fuelled demand for higher pay which the Government has not been in a position to fund. The resolution of pay and productivity disputes for passenger operations must be a priority to resolve for the new Government that has been formed, after a period of uncertainty following the departure of two prime ministers and their transport secretaries.
At least the situation for freight companies, which have been largely immune from traffic losses, is slightly better. Intermodal services linking ports with inland distribution centres now make up the largest element of volume and the trend towards home deliveries rather than high street shopping has increased the use of rail connected distribution warehouses.
There has also been a construction boom for housing and the impact from building HS2 which has seen an increase in demand for building materials. This has seen an increase in the use of rail connected quarries and new terminals for distribution to users. As a result, agreements have been reached for pay increases for rail freight staff which has prevented any disruption from direct strike action.
GBR DOUBTS
The legal changes required to enable Great British Railways to be created and control overall operations, including the award of contracts and other essential functions, will not be included in the immediate Government programme of legislation. This reflects unresolved conflicts over a number of issues that include the responsibility for timetabling and ticketing policy. It is also a contentious move to confine the contractual relationship with train
operators to a payment to run a specified timetable without any responsibility for initiatives to improve revenue. The powers that have been devolved to Scotland and Wales and combined authorities such as Liverpool City Region are also subject to review and have become an area of potential dispute.
RAIL INVESTMENT
Whatever the pressure on day-to-day spending investment in future projects is of greater long-term importance given the proven economic benefit of rail projects such as the Elizabeth Line and reopenings that have taken place such as the Borders Railway. When Liz Truss became prime minister there was a change of tone that emphasised investment, with promises that HS2 would be completed to Manchester, the East West Railway built as planned to link Oxford and Cambridge, and the reinstatement of proposals made by Northern Powerhouse Rail to upgrade and electrify between Liverpool and Hull. It remains to be seen whether these commitments will be retained as new Government leaders seek to cut the national financial deficit.
An outstanding part of the future agenda is the adoption of Network Rail’s Traction Decarbonisation Strategy that was produced in July 2020. The solution to meet the commitment of a zero net carbon railway was seen as electrification of the greater part of the network, with the use of alternative technology on rural routes with low traffic density.
One potential setback to the plan is that Deutsche Bahn has revealed that the use in regular service of hydrogen powered trains is judged to be uneconomic and will not be extended.