The Rail Industry – Predictions for the Year Ahead

Posted on: January 6th, 2017

Brexit may have dominated the headlines in 2016, but the rail industry’s profile has rarely been higher. It made the news for many reasons, but much of the publicity which it attracted was either negative or heralded imminent radical change. The position has become so parlous that Labour opposition has again suggested that private ownership of the industry would be in the interests of the public, triggered by yet another hike in ticket prices which comfortably exceeded the rate of inflation.

So what lies in wait in 2017?  We can expect many of the themes of 2016 to raise their heads again, as well as another turbulent twelve months.  

The public must be beginning to wonder whether the Southern Trains strike action is ever going to end, and despite numerous talks, no resolution appears to be in sight. Surely it can’t be long before the Government steps in?  The problem is that, as I have pointed out previously, the Government will have to demonstrate that the ‘force majeure’ rule doesn’t allow Govia Trains to successfully argue that it is not in breach of the terms of its franchise because the factors which result in its failure to provide an adequate service are beyond its control. Unless a compromise can be reached, my reluctant prediction is that this dispute will rumble on throughout the year.

What of the rail infrastructure?  In the Autumn Statement, the Government announced its commitment to a fiscal stimulus to boost Britain’s roads and railways. The idea is that better road and rail links will improve productivity by helping workers to work more quickly.  However, the Government’s focus is to be on ‘shovel ready’ projects which can turn investment into productivity quickly and I’m sceptical whether this can be achieved with the rail network given its antiquated condition and the planning complications inherent in major extensions or improvements to it. 

To complicate matters, the Government recently announced that it intends to reunite the operation of tracks and trains, which are currently the respective responsibilities of publicly owned Network Rail and the private train operating companies.  It has emphasised that this doesn’t herald the demise of Network Rail, but a partnership being developed between Network Rail and the train operators, alongside the introduction of organisations which will be responsible for both certain lines and the trains which run on them, such as the new line linking Oxford and Cambridge.  It’s not yet clear how this proposal will manifest, but the short-term uncertainty which will result will surely make it more difficult for the delivery of investment – whether from the public or private sector – to make a tangible difference to the lot of the passenger.

Having said that, we are told to expect major improvement works taking place across the rail network, particularly in and around London, in areas as diverse as London Bridge and Liverpool. Whilst this will hopefully deliver long term benefits, in the short term there will be more disruption for the long-suffering passenger.     

On a brighter note, Network Rail has pledged to almost double the number of places on its three-year Advanced Apprenticeship scheme, which received more than 4,000 applications in 2015. 140 extra apprenticeships are planned, which will bring the total number to 300, with recruitment taking place in March and September 2017. Network Rail has also moved the scheme to its training and development centre near Coventry, where apprentices will specialise in one of five areas: electrification and plant, overhead lines, signalling, telecoms or track. They will then move to local depots for on-the-job frontline training, as well as off-site learning.

Perhaps the most exciting –and positive development in 2017 (for the passenger at least) may well be the wider introduction of open access services. Contrary to popular belief, the rail franchisees don’t have a monopoly on services in their franchised areas. Independent firms can compete with the franchise incumbent and operate rival services, as long as they can show that they will expand the rail market. However, the Office of Rail and Road only approved four out of 19 so called ‘open access’ proposals received between 2000 and 2014.

However, in March 2016, the Competition and Markets Authority published a long-awaited review into the rail sector, in which it recommended the best way to push down fares and improve passenger services was to increase the number of train operators on the East Coast, West Coast and Great Western routes. This was followed by The Office of Rail & Road approving a new budget £25 service between London King’s Cross and Edinburgh, to compete with Virgin East Coast. There is a clear shift in thinking taking place.

Grand Southern has revealed its plan to launch a new open access company to run services between London Waterloo and Southampton on the South-Western network.  It has pledged to run less expensive services with more comfortably laid-out carriages on the London-Southampton route which South West Trains, owned by Stagecoach, currently runs as a commuter service.

To use a railway expression, this development is long overdue.

Finally, I haven’t mentioned HS2.  This continues to progress, but so slowly that few headline developments are expected in 2017, given the National Audit Office’s pronouncement in June 2016 that the timetable set by the Government was unrealistic.

Nick Gross, Chairman and Head of Transport & Logistics