The government has launched a review into the whole structure of the rail industry, but the focus is very much on passenger services, so could freight end up losing out?
The organisational and commercial framework for the rail industry is under scrutiny as part of a review ordered by transport secretary Chris Grayling in October.
Grayling focused on passenger services in his statement, but there is no doubt that the review, which will be headed by Keith Williams, deputy chairman of John Lewis add former chief executive of British Airways, will have a significant impact on the rail freight sector. The question is: can freight benefit from the review.
Passenger services, notably commuter services, have seen significant disruption recently. Grayling highlighted the fact that “on major commuter routes across the country, trains are packed each morning. Network Rail, which represents a third (38 per cent) of the industry (based on spend), is nationalised. It is also responsible for over half (54 per cent) of the daily disruption.
“But no matter whether it is a failure of the track, a fault with a train, or a customer incident, it is because there is little resilience or margin for error in the system that, when things go wrong, the knock-on effect can last for hours.
“This problem is compounded because the railway is run by multiple players without clear lines of accountability.”
Grayling was clear that he expects Williams to make “ambitious recommendations for reform to ensure our rail network produces even greater benefits for passengers and continues to support a stronger, fairer economy.
“It will consider all parts of the rail industry, from the current franchising system and industry structures, to accountability and value for money for passengers and taxpayers.”
And in a small nod to the freight sector, Grayling said: “It will consider further devolution and the needs of rail freight operators.”
One thing that Grayling rejected was renationalisation of the entire rail industry – one of the demands of the rail unions.
“There is an expectation that taking on hundreds of millions of pounds of debt onto the government books will magically resolve every problem. This fails to recognise that many of the problems that customers faced this year were down to the nationalised part of the railways,” he said.
The plan is that the review will result in a white paper in autumn 2019, with reforms being implements from 2020.
Clearly it is up to the rail freight industry to make its voice heard in the review process.
Certainly, the Rail Freight Group has set out the key issues in a position paper ‘Rail Freight Outcomes in Rail Review’
Director general Maggie Simpson said: “The Williams Review is fundamental to the future of UK rail and of all those who use the network. Our position paper sets out a framework for assessing potential options for structural reform to consider how the needs of freight customers will be addressed.”
The RFG points out that rail freight delivers economic and environmental benefits worth £1.7bn to the UK each year and is forecast to grow further in coming year. Customers of rail freight, who include industrial, retail and logistics companies see rail as a fundamental part of their supply chains and want to ensure that they can grow their rail presence and their businesses.
For rail freight operators in the UK, the big challenge has been to rebuild traffic following the collapse of coal traffic.
Worst hit by this has been DB Cargo which produced an operating loss of £38 million in 2017 – although this was a significant improvement on the £60m loss the year before. Turnover was down from £325m in 2016 to £312m in 2017.
In its results for the year to 31st December 2017, the company said: “The company has seen significant decline in its traditional markets of coal and steel over the past few years, which combined with other market effects resulted in the company announcing a major restructuring programme to enable the company to reshape the business.
“Realignment of the cost base and focusing on more efficient ways of working now places the company in a stronger position in what is a highly competitive and rapidly changing market.”
DB Cargo moved over to its New Operating Model in July 2017, but it said “there were challenges in the full implementation of the restructuring programme and as a result the company has not seen the full benefit of the restructuring programme in 2017.”
Top performer in 2017 was GB Railfreight, which produced a 21 per cent increase in operating profit to £9.5 million, on a 13 per cent rise in revenue to £143.8m.
In its annual results for the year to 31st December 2017, it was able to point to a series of new contracts including the Ministry of Defence, Biffa waste, Wincanton, Tata, and European Metal Recycling.
With the reduction of activity in the coal market, GB Railfreight either returned coal hoppers, or converted them to aggregate hoppers.
It said: “The rail freight industry remains competitive yet buoyant, which has opened up a great deal of opportunities for the company. With these opportunities comes a unique set of challenges in terms of allocation of resources, asset utilisation and not knowing the true impact of Brexit
Freightliner, which is focused on the movement of containers and so is less exposed to the coal and steel industries that DB Cargo, saw its turnover rise six per cent in 2017 to £195 million. It managed to reduce its operating loss from £6m in the year to 31st December 2016, to a loss of £1.1m in 2017. A tax gain also enabled it to show a profit for the year of £1.6m.
The company’s parent, Genesee & Wyoming, last year set out a programme to restructure and optimise Freightliner operations. “The company intends to complete the restructuring and optimisation programme by early 2019, The programme includes the rationalisation of the traction and rolling stock, management restructuring, and technology investments to upgrade systems to enhance productivity and service quality.”
What rail freight wants from the Williams review
The Rail Freight Group’s position paper argues that for any new structure to be a success for rail freight it must:
– Place freight customers at the heart of the industry, alongside passengers
– Encourage and deliver rail freight growth
– Maintain a national network for freight
– Give fair and equal access for all freight services
– Ensure that new and existing freight services can be delivered efficiently
– Enable continued private and public sector investment for freight
And it says that to achieve this any new structure must:
– Have an incentive framework embedded throughout which encourages and rewards freight growth
– Have a strong central function with authority over timetabling and access
– Have a national system of freight charges based on current principles
– Have the right legal, commercial and regulatory levers to deliver freight needs
– Have flexibility to meet the changing needs of freight customers.
New Technology and New Services
DB Cargo tracking system
DB Cargo has launched a service that enables customers to view rail freight deliveries in real time via an online tracking system. The web-based portal allows DB Cargo UK customers to see the number and type of wagons on their service, as well as exactly what progress the loco is making at any given time.
GB Railfreight expands fleet
GB Railfreight has expanded its fleet with a sale and leaseback of ten class 60 locomotives with Beacon Rail. It said the new locomotives will enable both higher trailing weights on certain routes, as well as offering greater efficiency. In particular, the increase in the number of locomotives means that there can be further growth on existing contracts, including GBRf’s ‘Flying Dustman’ service in partnership with Biffa.
Freightliner software solution
Freightliner has signed a five-year deal with software development specialist 3Squared to use its RailSmart suite of operational software and to collaborate on exclusive future RailSmart developments. RailSmart will start with the UK roll out of the competency management system RailSmart EDS and cloud and mobile-based solution for employee rostering RailSmart ORS.
Second Teesport rail link
PD Ports has launched a second rail service running directly between Teesport and Scotland. The service will run five days a week from the quayside at Teesport to PD Stirling Terminal at Mossend in Glasgow.
Silk road service starts
The first train in a service linking the UK to the new silk road to China made its maiden journey using the Channel Tunnel, earlier this year. The service operated on behalf of CMA CGM runs between London Gateway and Duisberg in Germany. It is being operated by operators such as GB Railfreight and Transfesa.
iPort rail freight terminal opens
The iPort Rail strategic rail freight terminal in Doncaster was officially opened by the Princess Royal in September. The multi-modal rail terminal is a 30-acre site within Verdion’s 337-acre iPort logistics hub and is designed to open up the Yorkshire region with new road, rail and air connections for national and international freight transport.
DB Cargo goes digital
DB Cargo has launched a digital rail services system, myRailportal, which allows customers to check railcar availability and place orders by specifying the type, number of cars needed and the departure and destination stations. After confirmation customers can track the status of the railcar and transport. Customers can also issue invoices via the end-to-end digital platform.
Stobart Tilbury train
Eddie Stobart has launched a train service connecting the Port of Tilbury to Tesco’s site in Daventry, and then Daventry to Mossend, Scotland. It is Stobart’s first train service to run from Tilbury, and has the capacity to travel with between 30 and 36 containers. It will run three days a week between the Port of Tilbury and Daventry, and twice weekly from Daventry to Mossend.
Peel Ports and DB Cargo have joined up to created new rail service for containers between Liverpool and Mossend near Glasgow. The service will initially run three days a week. The service will carry more than 40 containers per trip and comprise of 30 wagons.
Felixstowe rail expansion
Plans to increase rail freight capacity to and from Felixstowe have taken a step forward after Network Rail got the go-ahead to build a new bridle way bridge across the Felixstowe branch line.
The work on the branch line in this area will support up to ten additional trains in each direction.
This article first appeared in Logistics Manager, January 2019