Boom or bust? Or something in-between?

Part 1 of a two part series published in Railway Strategies on 20 April 2012

The National Infrastructure Plan issued in November 2011 set out, amongst many worthy objectives, twelve transport projects earmarked as ‘Priority infrastructure investment’. Fast forward just four months, and the early progress report – as you might expect – makes for mixed reading. King’s Cross and Thameslink have been reaching long-expected milestones, and Crossrail has started burrowing its way under London, but the Battersea extension of the Northern line is just as stuck at the station as it was two years ago, and HS2 looks set to have caught a slow train (although most in the industry are simply grateful that it’s finally pulling out of its sidings). To add to this are the many questions surrounding the refranchising process.

Despite plenty of industry optimism and apparent political drive, therefore, it’s worth asking – just what is the state of UK rail? Well, the Prime Minister himself had a pretty clear answer, in his pre-Budget speech at the I.C.E. on the importance of infrastructure – “Our railways are crowded and expensive. Compared to the French, Dutch and Swiss…our fares are 30 per cent higher, our running costs are 40 per cent higher and our public subsidy is double theirs. Now, you have to admit it is something of a miracle to achieve higher fares, bigger subsidies and poorer performance all at the same time.” Indeed. More debacle, than miracle, perhaps. (To what extent things might have been perceived differently had the financial crisis not sharpened the pencils of even the most hands-off rail accountants, is something we will never know.)

This train will be stopping at the next station

Whether or not the UK economy is now in a growth phase or on the brink of an EU-driven sinkhole, the revelation that Britain’s railways cost 40 per cent more per passenger mile than their European equivalents is sobering, to say the least. The McNulty ‘Rail Value for Money Study’ makes numerous recommendations as to how this should be addressed, and there is little need to repeat these here, but there is something of ‘chicken or the egg?’ to the debate that it has generated. Does there need to be great change in order to save money, or does there need to be great saving in order to effect change? Or both?

Suffice it to say that the recommendations within the report are unlikely to present a range of options for operators to increase their profit margins. The outlook for an industry anticipating reforms aimed at 30 per cent more efficiency is, predictably, challenging. 2012 will herald the beginning of the renewal of the UK rail franchises, and it’s fair to assume that this process is likely to involve some pain along with the gain.

But that is not to suggest that the industry should be downcast. There are a number of positive acknowledgements in the current debate, which must be respected.

Games with trains

Whilst it’s somewhat late in the day to tout the benefits of increased funding and construction as a consequence of the Olympics, there is no doubt that London will see extraordinary numbers of visitors during the games, and a number of London rail initiatives were born of the acknowledgment that an extra Tube service or two simply wouldn’t cut it. On a larger scale, a similar recognition of the inadequacy of the post-Victorian British tradition of ‘patch and mend’ has driven the development of both Crossrail and HS2.

To a certain extent, this argument for new rail infrastructure is self-perpetuating. Under-capacity constrains traffic and adversely impacts broader productivity in the economy. With new capacity comes additional traffic. With additional traffic comes further productivity, as people realise the potential of the new network. With more productivity, comes more traffic and constrained capacity. And so on.

Of course, there are environmental arguments against the assumption that a 21st century economy should aspire to driven by such a perpetual growth cycle. HS2 certainly looks set for a fight in this respect, whether on the basis of macro-economic analysis or local self-interest, but it’s difficult to recall a project of similar scope which did not give rise to such stark battle lines. Arguably, such opposition is as much an essential part of the great British way of life, and it is indicative of an inflexible planning system.

Connecting Manchester with…Frankfurt?

Once in a generation projects such as HS2 also provide an opportunity to encourage rebalancing on both an economic and regional scale. The City is often championed as the economy within the economy, or an engine at the heart of the nation. Whether either of those is true, it is a fact that the majority of international traffic flows through London, and it is only right that the importance of this essential artery has been recognised by massive investment in schemes such as Crossrail and Thameslink.

If the UK’s economy begins to move away from a finance-based focus, however, more and more business will need to be done outside the capital. An increased level of manufacturing will require an increased level of connectivity within the UK.
Given the debate regarding climate change, Government appetite for encouraging domestic air travel is at its lowest for some time. That can only be something which means increased rail passengers.

Can I get a receipt?

So, whilst it looks likely that rail will have as bumpy a ride as ever in the coming years, one way or another it seems the average Briton is destined to go places – with increasing regularity (and whether they really want to or not). And more and more frequently they are likely to be getting there by rail.

In our next article, therefore, we’ll be looking in more detail at how the Government plans to help them reach their destination, as outlined in the recent Command Paper on Reforming the Railways – aptly subtitled ‘Putting the Customer First’. Now that really would be a first…