What does the Industrial Strategy mean for rail?

As industry calls for better transport infrastructure, STEFANIE BROWNE analyses how the Government’s long-term game plan for rail might look

As a Chess novice, you will learn the moves of the individual pieces, analyse the possible options for tactical play and, after careful consideration, take a leap into the unknown by moving that first pawn. You know the rules, you’ve considered how you might respond to your opponent’s reactions, but you have not yet mastered the art of strategy.

Your adversary has been playing this game for a long time. She came prepared. She has a strategy mapped out in her head and an end-game clearly in sight. She knows the part all her pieces must play to reach it and she has a backup plan, in case she makes a mistake. Who would you bet on? Everyone has to start with the tactical approach, responding to each opportunity as it presents itself. But harnessing long-term prospects for success requires a long-term strategy, whether you’re mastering the game of Chess or running a country.

Our prospects and opportunities as a country changed significantly last summer, when the result of the EU referendum flung Britain into a period of uncertainty and, for many, fear. But whatever your views on Brexit, it is clear that the country quickly needed to make a positive step towards a plan for the future.

On January 23, Prime Minister Theresa May launched the Industrial Strategy. “It is a plan for a nation that stands tall in the world and succeeds in the long term,” she said. “And it is a critical part of the plan for a postBrexit Britain.”

The Green Paper she released provides a set of proposals for discussion and consideration, with an invitation for anyone

We will work with the Government on this, to strengthen the capability and competitiveness of the UK rail supply chain to grow business at home and abroad. Gordon Wakeford, Industry Chairman, Rail Supply Group

with an interest to respond with their thoughts - “it is not intended to be the last word, but instead to start a consultation”.

Of course, this means that the Government is likely to be inundated with responses from all kinds of sectors, which could be counterproductive for those that do not present a collaborative, joined-up view.

With that in mind, the Railway Industry Association is preparing to respond to the consultation on behalf of the Rail Supply Group and their members, and Rail Forum East Midlands and Rail Alliance will also be responding on behalf of their respective members.

In calling for a joined-up approach, Rail Alliance said: “It is clear that the Government will listen most closely to those sectors which are consistent and coherent in expressing both their needs and the potential economic benefits throughout

Good transport infrastructure does not just reduce delays; it can raise productivity by enabling towns and cities to achieve agglomeration effects. Building Our Industrial Strategy, HM Government, January 2017

the UK. Response to this consultation will be very important for the industry as a whole, and for the supply chain in particular, so the more that response can be informed by experience and expertise the better.”

Gordon Wakeford, industry chairman of the RSG, supports the view that we must get this strategy right: “We will work with the Government on this, to strengthen the capability and competitiveness of the UK rail supply chain to grow business at home and abroad. If we are clever with our approach, it’s not just the current UK rail industry that will benefit from increasing investment in the railway, jobs and opportunities can be cascaded across the entire country.” So what will they be responding to? The paper states that a modern industrial strategy must:

build on its strengths and extend excellence into the future;

close the gap between the UK’s most productive companies, industries, places and people and the rest; and

make the UK one of the most competitive places in the world to start or grow a business.

Ten pillars underpin the proposed way forward for the Industrial Strategy and form the basis of what the Government seeks consultation on (see panel, below). Several of those pillars could be of significance to the rail industry, but one in particular has attracted a public response from rail companies: upgrading infrastructure.

In a report released shortly ahead of the Government’s Green Paper, construction firm Mace describes the need to put construction at the heart of the Industrial Strategy, suggested as part of a series of policies to boost productivity and regional growth.

“Poor infrastructure in the UK, particularly in transport, is holding back our economic growth and the attractiveness of Britain as a place to invest,” says the report. Analysis by the World Economic Forum recently ranked the UK 24th in the world for quality of transport infrastructure, meaning we’re behind countries such as Iceland and Portugal.

The same research showed that every pound spent on capital projects (including transport) delivers between 5% and 25% economic return.

Mace highlights that the Prime Minister’s goal, to create a more geographically balanced model of growth for the UK, is currently being prevented by the poor state of transport outside of London, and that better regional connectivity is vital to enable growth.

Says Mace: “Our own research, conducted by a former Treasury economist, confirms this and shows that even modest improvement schemes, such as road widening or rail signalling enhancements, particularly at pinch points, would deliver huge benefits. The analysis shows that small interventions that made average journey times between major cities outside of London just 60 seconds faster would deliver economic benefits of £ 3.4 billion each year.”

Mace sets out four “essential policies that are needed to help kick-start the UK’s post-EU industrial renaissance”.

The first is to give the UK a competitive advantage by investing in research and development. Mace says that the construction sector is lagging behind others in regard to innovation and productivity, and that leaving the EU means we need to recognise the crucial role the sector has to play in making the UK an attractive place to invest. The firm also calls for policies to be put in place to incentivise innovation.

The second policy suggested is the creation of mayor-led infrastructure enterprise zones. Mace believes that the devolution agenda will help efforts to rebalance the economy geographically, but that more powers over the local economy should be given to mayors in areas where there is a proven case that devolving such powers leads to economic benefits. The report cites the redevelopment of Birmingham New Street station (for which Mace won a National Rail Award in 2016), London St Pancras and King’s Cross.

Says the report: “These show how infrastructure, retail and housing can combine to produce important local zones of new jobs and growth creation - but in many other areas a boost of financial incentives is required to kick-start the development of local markets.”

The third policy is about drawing talent to the north - and keeping it there. Mace says the “brain drain” to the south is stifling economic development in the north and must be tackled as an urgent priority. The suggestion is to set up a National Civil Service Fast-Stream College in a major northern city (such as Manchester or Leeds), which would attract northern graduates and others with technical skills to begin a career in the senior civil service. This would then be used to work with regional employers to create industrial placements in the north.

The fourth and final policy is about devolved transport delivery bodies. Mace says: “London’s world-renowned public transport network is a direct result of power being handed to the mayor. This model has been replicated to some degree with Transport for the North, but we believe that body needs greater independent power, and the model should be replicated in every major region.”

Since publication of this report, Secretary of State for Transport Chris Grayling has given his support to Transport for the North’s independent statutory status proposal to become England’s first subnational transport body, so some of this is already under way.

While the Industrial Strategy sets out that infrastructure is a supporting factor to the other pillars, it specifically refers to the role that transport infrastructure has to play:

“Good transport infrastructure does not just reduce delays; it can raise productivity by enabling towns and cities to achieve agglomeration effects, and so support the rebalancing of our economy. Better connected towns and cities have deeper labour markets, greater competition and greater economies of scale, leading to higher growth and living standards. This is one reason the Government is supporting the development of major infrastructure projects like Northern Powerhouse Rail and the Midlands Rail Hub - to join up towns and cities more effectively, and enable them to pool their labour markets and economic strengths. HS2 is driving major regeneration schemes across the UK, and has already played a role in attracting significant new investments.”

Mark Elsey, infrastructure partner at law firm Ashurst, is pleased to see the Government’s commitment to improve transport because it is key to business efficiency and growth. However, there are challenges.

Says Elsey: “Against a background of an investment backlog and continuing budgetary constraints, the challenge for the Government is to establish clear priorities and to create the requisite delivery capability. Bringing in private sector investment and innovation still requires careful planning and smart procurement by the public sector. The big question is whether Government Departments, the National Infrastructure Commission and the Infrastructure Projects Authority are properly resourced and empowered to respond to this delivery challenge.

“Delivering on an effective and wideranging infrastructure programme will be resource intensive at a time when the Government is already facing significant resource challenges in meeting the huge legislative and trade burden arising from Brexit.”

It is clear both from the words of the Industrial Strategy itself and those of people in the rail industry that Brexit represents both an opportunity and significant challenges in creating a strategy that will deliver the desired benefits. Consultation on the strategy closes on April 17 - it will be interesting to see how the Government reacts to the advice of the rail and wider transport and infrastructure communities in forging ahead with Britain’s Industrial Strategy.