Categories
The Enterprising Railway

A Railway Fit for The Future

RAIL REFORM GROUP

A Railway Fit For the Future? Some thoughts on trends and the impact of Covid-19 

by Dr Nicola Forsdike

Introduction

This paper is written against a background in which the infection rate of Covid-19 is once again increasing. Writing this in the run up to Christmas 2020 it is difficult to see life returning fully to its former rhythm any time soon, notwithstanding the beginning of a vaccination programme.  The impact this is having on the transportation systems of the UK is profound and brings both challenges and opportunities for Britain’s rail network. This paper argues that the impact of Covid-19 on the way people live and work and hence on our economy will have a lasting effect.  This is because many of the trends we are seeing were already in evidence before Covid-19 arrived in the UK and have simply been accelerated.

Whilst the immediate impact of Covid-19  is presenting policy makers and transport operators with very urgent issues of funding and service provision, longer term trends call into question the very role of passenger rail in Britain. There is a need for a reappraisal of this and for a re-focussing on the competitive advantages of rail within a multimodal transport approach. Whilst the temptation will be to shunt these issues into a siding until the immediate crisis has passed, a better outcome will be obtained if rather than focussing solely on where we are now, decision makers hold to a longer-term vision. In that way, decisions taken now can build towards that, rather than acting as barriers to future development. As anyone who has tried to restore railway lines, infrastructure or other facilities will know, decisions taken in the past can be difficult and costly to reverse if the original decision makers failed to take into account potential futures

Rail is a derived demand service – that is, very few people get up in the morning with the objective of catching a train (any train!) that day for the pure joy of the ride. For most, a rail journey is a means to get to work, go on holiday, enjoy an area of natural beauty, visit friends, go shopping, go to an event and so on. Whilst some of these demands are temporarily suppressed by the restrictions on people’s social lives imposed as a result of Covid-19, others were being shaped by wider events even before Covid hit. This paper will first reflect on these, and the potential impact these may have on rail travel, before turning to the question of what these may mean in terms of the sustainability of Britain’s passenger rail network, and how the UK plc might organise resources to best deliver this.

My observations are based on my experience of working in and researching on the rail industry. They are also informed by my professional background in strategy and marketing, both of which encourage an outward view and a focus on those who pay for the railway (funders), those who use it, and other stakeholders such as taxpayers, employees and local communities. I begin by setting the contexts within which Britain’s network developed and within which it now operates. 

Context

To understand today’s industry, it is useful to explore how it has reached its current form. Britain was the first to the market with rail systems. As is so often the case in innovation, first to market does not necessarily mean best; later entrants are able to learn from the experience of the first entrant and use that to improve their operations.

In his book “The World’s First Railway System” Mark Casson suggests that the model by which Britain’s railways were initially constructed, that is, led by the private sector with minimal state subsidy, led to the creation of a railway system that was incredibly inefficient. In particular, it led to major cities such as London, Manchester and Leeds failing to develop as major railway hubs as the competitive environment encouraged the building of separate stations rather than integration. A system laid down over 100 years ago continues to present barriers to cross country travel today. In contrast to the railway system that was developed, Casson’s counterfactual model of an efficient railway for Britain has stronger city hubs and a much better cross-country network than the one we are forced to work with now.

Casson relates how much of the early rail network in Britain was developed with a focus on international trade.  In northern England, transPennine routes were developed to link the ports of the east and west coasts, for example, from the west coast through Carlisle to Newcastle or from Liverpool to Hull. These routes formed part of an international transport network that stretched from northern Europe to North America. Similarly, Britain’s ports played a leading role in the development of key routes to London alongside regional cities looking to link to the capital. The railways thus promoted to meet the economic needs of the mid-nineteenth century continue to be the backbone of the network today. As such, our patterns of living and working have been to some extent ‘hardwired’ by actions taken over a century before we were born.

Not surprisingly given the inefficiencies in the early system, over time, companies consolidated until the delivery of rail services in each of a number of specific geographic regions was dominated by a single vertically integrated organisation, operating both track and train. This vertical integration appears to be the ‘natural form’ of a railway system left to its own devices, a form explained by the fact that a railway is a complex system, requiring the integration of fixed resources (track, stations etc), moving resources (trains) and people. For the system to work efficiently, an understanding and oversight of each component part is absolutely fundamental.  Splitting the operation of the system into different components under different bodies inevitably leads to inefficiencies as no one organisation can have perfect knowledge of what is happening in another, whilst there are costs to managing interfaces. This can of course happen in large integrated organisations! The difference in the case of the latter is that relationships may be bound by corporate kinship, not contracts, whilst a single board retains complete oversight. Information is able to flow more freely, facilitated by mechanisms such as joint training across different disciplines, (as practised by Britain’s former nationalised rail operator, British Rail), joint planning and so on. Importantly, each element has a common objective and goal.

In contrast, Britain’s railway as we knew it prior to Covid-19 was split into a myriad of different operators all answering to different shareholders. The operation of the track was split from the operation of the train with the infrastructure operator held to account by an independent regulator. Whilst train operators work to short-term objectives, needing to realise the return on any investment within the lifetime of a seven-year franchise, the infrastructure operator is investing for the long-term. Obtaining system efficiencies under this structure becomes difficult.

The railway system we have inherited was created for an industrial Britain that no longer exists. The cost of changing infrastructure means travel corridors remain hard- wired. Decisions have a long-term impact and act as a constraint on economic development. As a travel mode, with expensive, fixed infrastructure, rail is not always best placed to respond rapidly to changes in the market.

Trends

I suggested earlier that the impact of Covid-19 might be not so much to bring new pressures to the railway, as to accelerate trends that we could already see. As a derived demand service, rail is susceptible to changes in in its wider environment. I suggest the following stand out as potentially having a negative impact on rail demand:

1) Changes to patterns of living and working. For several years now it’s been obvious that the commuting patterns for some workers have changed. In particular, many management and professional roles no longer require people to be located in a central office between the hours of 9 am and 5pm 5 days a week. Train operators on some routes have found that rather than trains being equally full in the rush hour every day of the week, certain days of the week may be quieter, as commuters work from home on one or more days whilst there has been a vocal and very public demand for more flexible season tickets, a demand the industry has been slow to respond to. The impact of increased home working during the Covid-19 crisis has demonstrated to major companies, including financial services companies with major offices in the centre of London, that they function perfectly well without the expensive overheads of large working spaces. Despite the protestations of Government, it is hard to see how old working patterns will ever return. It hardly needs to be said that this will have a major knock-on effect on commuter rail services into city centres, and especially into London.

2) Changes to leisure travel. For as long as social-distancing applies it is hard to see how demand for travel to sporting and cultural events will return to pre-Covid levels. The Alice in Wonderland system of rail franchising has encouraged rail operators to compete with each other by attracting ever increasing numbers of rail users. This in turn has led to a complex system of demand management and associated fares. Lower fares fill up excess capacity but also generate new journeys. Increasing demand is used to justify calls for new services and more investment into new routes such as HS2. No one questions whether an endless pursuit of growth is actually in the interest of the taxpayer. The economic argument would be that more travel opportunity increases demand for products such as events, which in turn allows them to sell out at higher prices. In this way the economy grows. On a finite railway system, (indeed, on a planet with finite resources!) it is hard to see how this model, which might work admirably in the short term, is sustainable in the longer term. With some predicting any recovery in the economy might take until 2024 (a date which seems to be less and less achievable the longer Covid continues) this would seem to call for a permanent reduction in the number of trains run pre-Covid.

3) Attitudes to the environment, particularly relating to air travel. Air travel is forecast to take a number of years to return to pre-Covid levels. Fewer air trips mean fewer trips to airports. Some airlines may go out of business and is difficult to call whether the era of cheap flights and weekends away in destinations abroad will survive, particularly if environmental concerns continue to lead people away from air travel. All this suggests a longer- term negative impact on the demand for rail services to airports.  At the same time, countries in mainland Europe are restoring axed overnight long-distance rail services to reduce the demand for short-haul flights. Is there a role for rail to take over the journeys from short-haul flights in Britain, both domestic and international ones?

4) Changes to patterns of shopping will also impact rail travel. Given the increasing importance of online sales will people continue to use such channels rather than travelling to physical shops once restrictions are eased? At the same time, a kick back against ‘fast fashion’ amongst those concerned with its impact on the environment, combined with an economic recession, will serve to reduce trips to the high street and shopping leisure days out. This too will impact on rail trips, particularly at weekends unless retail can rebuild its position as a safe social experience.

Implications for our rail system

 

Notwithstanding the admirable speed at which government and railway adapted to the initial Covid-19 situation, in the longer-term rail is not well placed to adapt quickly to major shifts in the way people live, work and relax. One the one hand it is hard to flex infrastructure quickly. Stations are fixed into position and hard to move, as are railway lines.  At the same time the industry is not organised for change. It is hard to see who is accountable for considering the long term role of rail in  Britain. Given that decisions on infrastructure made over 100 years ago are still having a major impact on our travel patterns today there is a pressing need to consider the travellers of 100 years hence. Schemes such as HS2 appear to be predicated on casting forwards selected economic trends, not on envisioning what Britain might be in 100 years’ time (in fairness, I should point out that the route of HS2 is not unlike a model proposed by Casson as considerably more efficient than the existing pattern of competing main lines from London to the north, though sadly HS2 perpetuates the problem of having different terminal stations for different rail routes).

Fragmentation within the rail industry means the costs and benefits of innovations that would benefit both taxpayers and travellers do not always fall to the same party. The technology for nationally available smartcards for example has existed for many years, but it is in no operator’s  interest to implement this. In today’s world, power comes not from monopolising routes but by monopolising data. The incentive then is for each operator to gather and jealously hold information on customers and customer journeys, mitigating against a national system. In optimising their individual positions, each player undermines the efficiency of the system as a whole

A railway for the future

Thinking about the world two generations hence, is it conceivable that people will still live in suburbs and satellite towns, commuting into work in city centres? Will London and the City still dominate the economy? And even if it does, with the growth of digital technology will people still need or want to travel to the same extent as before Covid hit? From my attic in the north of England it seems unimaginable that the world will simply go back to as it was before.

If not, what is the alternative, and where does rail fit in with that? Possible solutions could include:

  • A network planning approach to re-shaping the network. We need to dare to imagine what economy we want for our country in 50-100 years’ time, where the economic centres will be and how wealth will be shared. We will then have road map to shaping the infrastructure we have to fit that, not around the needs of Victorian Britain built for a dominant London centre of finance and Northern centres of manufacturing. This might mean having the courage to close some routes or stations, or at least move them. It also means that new rail schemes should be based on a sensible colouring in of the rail network map, not developed piecemeal as a series of one-off schemes based on who has paid for the best consultants or has the greatest political influence.
  • As part of this, we should focus on improved connectivity between regional towns and cities – Oxford-Cambridge is a start, TransPennine should be much more of a priority than HS2
  • Using flexible modes – eg tramtrain or technologies that do not yet exist to develop local networks in new ways and to integrate them better into  the mainline rail network.

It’s important to note that the rail industry has only so much resource, not just financial resource but also skilled people. It’s arguable as to whether UK plc cannot pursue more than 1-2 grand schemes at once. Whilst the suspension of CrossRail 2 helps, with HS2 and Oxford-Cambridge drawing in so much money and expertise, where does that leave other schemes?

Organising for a different future

Going forwards, there is much talk of changes to the franchising system. One possibility is that the government might go for an extension of the TfL model, where a regional transport authority takes the revenue risk for rail services, whist operations are let as concessions through competitive tender. It’s not clear how the taxpayer can get the best deal from this. Amongst other things, why are local authorities better placed to anticipate market demands than the private sector – and what would the impact of a regionalised structure be on intra-regional travel, which as Casson points out has been weak right from the first day of the development of Britain’s railway? Indeed, a cynic might suggest that this looks like an attempt by national government to ensure any blame for failings of rail in future falls on regional transport authorities.

Conversely, devolution of transport powers seems to be working relatively well in Scotland and Wales, resulting in investment in the network. Here however, transport powers are linked to a wider devolution of responsibility for other public services and economic growth, allowing authorities to plan in a holistic way that seems beyond the reach of the government in England.

There are also a number of contractual mechanisms and alternatives, which could be used to help the railway be more responsive to market changes. I’ve outlined previously (see http://www.paulsalveson.org.uk/2020/05/01/the-enterprising-railway-2/). These include developing a contractual structure that encourages information sharing, knowledge development and challenging of the cost base whilst rewarding collaborative innovation.

Afterword

This paper has outlined some of the market changes taking place and suggests that rather than focussing solely on where we are now, decision makers should hold to a longer-term view. It remains to be seen whether the Government will have the vision and courage to embrace a longer- term view or whether the vested interests of the political system and rail industry in Britain will allow this chance to shape the future to pass by, prioritising short term expediency over long term gains. We currently have an opportunity to re-set the vision for Britain’s railway network. It would be irresponsible to waste it.

December 16th 2020

 

 

One reply on “A Railway Fit for The Future”

The point you make about city rail hubs is an interesting one – Birmingham, Bristol, Edinburgh, Leeds, Newcastle and Sheffield are examples of cities where the main station is the hub for rail services in all directions, whereas Glasgow, London, Manchester suffer from effectively having multiple termini. HS2 perpetuates this in London and Manchester – too late now for London but could still be done for Manchester. The result is that inter-region travel is always slower than travel to London. Your paper raises a lot of interesting points, and certainly the need to strategically design a rail network for 2100.

Leave a Reply

Your email address will not be published. Required fields are marked *