Sam Sherwood-Hale talks to Darren Caplan, Chief Executive of the Railway Industry Association (RIA) about what he is looking forward to in 2019
Darren Caplan joined RIA as Chief Executive in January 2017. Since then he has led the RIA team, with a mission to promote rail supply sector growth, increase RIA’s visibility amongst political and stakeholder decision makers and influencers, and ensure RIA develops into the very best trade association it can be for its members.
On 1st October 2018 RIA called for more funding into rolling stock research and development (R&D) in its submission to the Autumn Budget.
I questioned him about this and the other key ‘asks’ he has for the rail industry in 2019 and also looked back at the big stories for the sector from 2018.
The focus on the UK’s future relationship with the European Union dominated the news in 2018 and has bled into this year as well. What’s some good news we might have missed?
With so much Brexit talk in recent months, it is easy to forget some of the major other political announcements over 2018 regarding rail.
Perhaps most significantly, 2018 saw the Statement of Funds Available (SoFA) for railways providing a welcome £48 billion for rail infrastructure over the five yearly funding cycle, Control Period 6, which starts in April. We have seen a Rail Sector Deal published, which provides the basis for further cooperation between industry and Government. And despite some difficult developments on some major projects, good progress was made on schemes across the UK.
At RIA, the national trade body for the UK’s supplier community, we believe even more can be done to help build a world-class rail network for the future, and assist our exports efforts overseas, in what are clearly uncertain times. At the start of 2019, it is worth considering the key priorities for the rail supply community.
What do you believe these key priorities to be and what can be done to support this initiative?
First, we should highlight just how valuable the rail industry is and the contribution it makes to UK plc. In 2018, RIA and some of our members commissioned independent researchers Oxford Economics to examine the value of UK rail, as it was clear that previous studies were underestimating the size of the railway industry.
The Oxford Economics research found that rail contributes over £36 billion to the UK economy, three and a half times bigger than previously thought, and employs some 600,000 people, two and half times bigger than previously thought, and more than the workforce of Birmingham.
Furthermore, rail provides £11 billion in tax revenues to the Treasury, meaning that excluding capital investment, rail fully pays for itself. And for every £1 spent in rail, £2.20 of income is generated in the wider economy, meaning rail is not just a significant sector in its own right but is also crucial to boosting GVA and jobs in the wider economy.
The study also conservatively estimated that £800 million rail products and services are exported abroad annually.
The reason for these new figures being so much higher than previous studies is that past work only looked at Britain’s mainline rail system, and did not include metro systems, including the London Underground, capital investment, exports, station catering and retail, and indirect and induced jobs. Other sectors measure their size by looking at wider industry in this way – aerospace/aviation supports almost 1m jobs and £52bn GVA, and automotive 700,000 jobs and £45bn GVA, for example – so one wonders why rail undersells itself, as it clearly has been doing in the past.
Now the true size of the rail industry is known, it is important that the Government acknowledges both the heightened economic and connectivity benefits the industry brings to UK plc; and supports it accordingly so that it can do even more to benefit the country.
What are some things the Government could do to help rail deliver even more in 2019?
There are five key issues we and our members believe the Government could act on in 2019 to assist the rail industry in providing even more for UK plc. These are:
- Commit to ending ‘boom and bust’ in rail funding.
- Ensure a visible pipeline of enhancements that provides confidence for rail suppliers.
- Ensure that electrification remains a key option for decarbonising the rail network, subject to costs being reduced, as per RIA’s Electrification Cost Challenge.
- Ensure maximum benefit from the £245 million allocated for infrastructure R&D, and identify potential additional sources of funding to support non-infrastructure rail R&D; and
- Ensure the Rail Review does not stall investment in the rail network.
What is the cause of ‘boom and bust’ in rail funding and how would we go about ending it?
‘Boom and bust’ cycles in the rail industry occur because funding settlements for each cycle, known as Control Periods (CP), are not delivered consistently over five years. Instead, in every CP to date, there has been significant ramp ups followed by drop offs in workload, detrimentally impacting the rail industry by adding up to 30 per cent to the cost of running the rail network and stopping businesses from investing in people, plant and processes due to lack of confidence in future work.
A recent poll of more than 120 rail business leaders, conducted for RIA in October 2018 by independent polling company ComRes, found that virtually all of them (99 per cent) agreed there are peaks and troughs in rail funding to some degree, two thirds thought the term ‘boom and bust’ described the nature of Government spending in rail, and more than four in five who saw peaks and troughs said that these had a negative impact on their organisations.
What’s more, 61 per cent had frozen recruitment as a result of boom and bust, 50 per cent chose not to employ a staff member and 45 per cent decided not to invest funds in their organisation as a result. Nearly all – 96 per cent – said the Government must do more to smooth out peaks and troughs in rail spending in future.
So, the first key ‘ask’ is for the RIA to call on the Government to smooth the funding of renewals work within and between Control Periods. And it is the top priority for many RIA members, who regularly raise this issue with us.
How do we ensure a visible pipeline of enhancements?
Unlike previous Control Periods, the forthcoming CP6 – April 2019 to March 2024 – does not cover the funding of enhancements, or upgrades, to the rail network. Instead the Government has developed a new Rail Network Enhancements Pipeline (RNEP), which will bring projects through a staged approval process to ensure appropriate ‘checks and balances’ for Government funded schemes.
RIA understands and supports the objectives behind this approach of achieving value for money for taxpayer funded projects. However, there are no construction-ready schemes within the RNEP which makes it highly likely that there will be a significant reduction in enhancements workload over the coming few years.
There is a danger that if the enhancements workload falls away, the relevant skillsets will be eroded or lost, as companies shift their rail capabilities into other areas, to other sectors or overseas. This is exacerbated by the fact that the skillsets required for enhancements are very different from other rail work, such as renewals, as enhancement projects require a multi-disciplinary approach.
So, this needs to be tackled quickly and is something the Review needs to consider urgently. This brings me to key ‘ask’ number two, which is that RIA recommends the Government maintains the funding for enhancements to at least CP5 levels (2014-19), to ensure the supply chain can continue improving services and increase capacity. RIA also recommends the Government publishes a visible pipeline of rail enhancements and keeps this regularly updated as projects progress through the stage gate approval process.
How important is it to maintain rail electrification as an option and what needs to be done to keep it that way?
In July 2017, the Government announced its decision to cancel a number of electrification schemes, including between Cardiff and Swansea, Kettering and Sheffield, Chippenham through Bath Spa to Bristol Temple Meads and Didcot to Oxford. Ostensibly, – due to cost.
However, electric traction remains the optimal technical solution for intensively used railways and, along with emerging technologies like hydrogen, battery and trimodes, must be considered as an option for future rail upgrades, particularly in light of the Government’s challenge to decarbonise the rail network by 2040.
Electrification has been shown to be better for the environment, quieter, improves journey times, produces less wear and tear on the track and reduces passenger delays. In the long term it is also more economic and costs less when compared to the whole-life costs of diesel services.
RIA believes electrification could be delivered at significantly lower cost and has been investigating how to achieve this through its Electrification Cost Challenge, an initiative that brings together a number of Tier 1 and Tier 2 contractors, consultants and suppliers to see why costs are high and what can be done to reduce them. A report based on the Challenge’s findings will be published later this year.
So, this would be key ‘ask’ number three: RIA calls on the Government to continue to support electrification schemes, and to keep electrification on the table whilst it works with the industry to see how costs can be reduced to cost effective levels.
Back on 1st October 2018 the RIA called for more funding into rolling stock research and development (R&D) in its submission to the Autumn Budget. At the end of that month rail regulator Office of Rail and Road (ORR) released its Final Determination which increased infrastructure R&D funding from £100 million to £245 million. How do we ensure maximum benefit from this?
For many in rail it was positive to see the ORR increase infrastructure R&D funding in its Final Determination. RIA supports this increase which will allow the rail industry – with matched funding from the private sector – to develop new and innovative solutions to improve customer and freight services.
However, whilst RIA welcomes this funding and the frameworks and innovation partnerships, there is no R&D funding for rolling stock or train operations, which will significantly reduce the ability of suppliers to take high-risk leading-edge development.
The rail industry has already shown a willingness to co-fund R&D, as best demonstrated by the UK Rail Research and Innovation Network (UKRRIN), the £94 million partnership between academia and industry.
The lack of co-funding in CP6, though, will make it difficult for multinational companies to make the case for R&D in the UK. And it will directly impact customers as well as the Government’s aim of decarbonising the rail network by 2040. As the rail network is a system, infrastructure and rolling stock R&D need to go hand in hand to get the best improvements for passengers and freight.
So, this is our key ‘ask’ number four. There is an urgent need to identify potential additional sources of funding to support non-infrastructure rail R&D and to ensure the maximum benefit from the £245 million allocated for infrastructure R&D. This is particularly important given the imperative, in a Brexit world, for the UK supply chain to maintain and improve its domestic competitiveness and export potential.
You mentioned the Williams’ Rail Review, what are your hopes and expectations for the results when they are published at the end of this year?
The Williams’ Rail Review provides a significant opportunity to holistically review the UK rail network. For rail suppliers, though, the review must not throw the industry into stasis whilst we await its findings – to do so would result in a loss of work momentum and certainty for the supply chain.
We therefore welcome confirmation from the Government that business will continue as planned but will also watch closely that investment decisions are not affected as the review gets underway.
Crucially, as mentioned before, the review should also be used as an opportunity to remove ‘boom and bust’ in rail infrastructure funding.
Finally, what are your thoughts on 2018 as a whole and what do you think 2019 will bring?
It is clear that there was some very good news for UK rail in 2018. On major projects, we welcomed the commitment in the Autumn Budget to further funds for Northern Powerhouse Rail, East West Rail and the Docklands Light Railway, all of which are vital and will unlock economic growth, investment and jobs in different regions of the country. Transpennine Route Upgrade has secured significant funding. And, despite the political controversies, strong progress was made on both HS2 Phase 1 and bringing Crossrail closer to eventual completion.
RIA urges the Government to move at similar speed on Crossrail 2, and to set out its plans to safeguard and fund the project as soon as possible, in order it to progress.
There is much more to be done in 2019. As I’ve said, we need to smooth out ‘boom and bust’ in rail funding, provide a visible pipeline of enhancements, ensure electrification remains on the table when decarbonising the rail network, ensure match-funding is provided for rolling stock R&D in CP6, and ensure the Williams Rail Review does not stall investment in the rail network.
We need to be aware of the challenges and opportunities posed by Brexit. Clearly we need to understand how any changes on standards, access to a skilled workforce, and frictionless trade could, post-Brexit, impact UK rail supply, and do whatever we can to mitigate these impacts. But we also need to ensure UK rail suppliers take advantage of the Brexit drive to boost exports and inward investment as the Government seeks to promote a ‘Global Britain’. And RIA would like to see rail have a stronger presence in any trade deal discussions the Department for International Trade are having with other countries.
As we go through 2019 and enter a new Control Period in April, RIA and its
members will continue to campaign on these ‘asks’, and call on the Government to engage with the industry to ensure the rail supply community can deliver the best rail network possible in the future. As the Oxford Economics study released in 2018 showed, rail is not just an important sector in its own right but – given its size and contribution to the country’s wider economy and connectivity – it is crucial for UK plc, as we enter particularly uncertain times in the months and years ahead.