Industry seeks ways out of a jungle of uncertainty

INTRO: Set up to inject long-term thinking into a fragmented industry, Britain’s Strategic Rail Authority has just seen the fruits of its labours torn up by a government desperate to find a quick political fix for the troubled national rail network. The challenge facing the private companies is to chart a path out of the turmoil inflicted on Britain’s railways by the Hatfield derailment and successive policy changes, finds Murray Hughes

IT IS, PERHAPS, the end of the beginning for Britain’s privatised rail network. When British Rail ended life on April 1 1994 as a national railway owning tracks and running trains, we wrote that Britain’s railways were starting a journey into the unknown, with passengers and freight customers the guinea pigs in a complex and ambitious experiment. No-one dreamt then just what turmoil that experiment would cause.

The hasty sale in 1995-97 of around 100 companies that had formed BR was the most drastic process of railway reform ever attempted, and since then many of the companies that bought chunks of the business have experienced a rocky and unpredictable ride. The private sector is by nature risk-averse, and initially managers of train operating companies were able to plan on the basis of known funding levels agreed under the franchise terms. Infrastructure company Railtrack too could plan in advance thanks to the contractually-agreed access payments it received from the operators.

Despite attempts to reform the industry to give long-term financial security, events have conspired to confound many business plans, and the position has been made worse by changes in government policy. In July, newly-appointed Secretary of State for Transport Stephen Byers ordered another change of course that threatens to take the industry back into the stranglehold of short-term thinking that so bedevilled the nationalised railway.

Although two companies that entered the railway industry as train operators failed to make the grade, buoyant traffic growth - until last October’s derailment at Hatfield - helped the survivors make up for the decline in subsidy levels set out in the franchise agreements. Under the original franchise programme, government support for the passenger railway was due to fall from £1·8bn in 1997-98 to £724m in 2003-04, but that aspiration has long been abandoned as the extent of neglect during Railtrack’s stewardship of the network has become clear.

Railtrack’s apparent ability to spend vast sums of money yet not improve the network in its charge has led to the collapse of its share price and to its present parlous financial state, in turn preventing it from generating badly-needed investment funds. Hopes now rest on changes instigated by Chairman John Robinson, who since his appointment in June has acted swiftly to start rebuilding confidence.

At the moment, Railtrack and the train operating companies are engaged in frantic attempts to restore their credibility after the recent unprecedented chaos. Pre-Hatfield, a question about the success of privatisation generated a generally positive answer, based on strong growth in both freight and passenger traffic, although there were serious problems with major projects and day-to-day management of engineering work. Post-Hatfield, it has been a vastly different story, for that single accident exposed deep and grave flaws in the complicated structure of the industry.

Above all, Hatfield highlighted Railtrack’s neglect of the wheel-rail interface on an intensively-used railway. Ironically, it has drawn attention to the need for strong engineering and expertise in railway technology at management level - not long ago dismissed as irrelevant by politicians who blithely considered that private-sector acumen alone would suffice to revitalise the railways at minimal cost. But recruiting good engineers to a business perceived to be in trouble is not proving easy.

Investment plans collapse

The 10-year plan that former Transport Secretary John Prescott launched in July 2000 with a promise of over £60bn of investment in the national railway has foundered, as has the Strategic Rail Authority’s refranchising programme (p591). SRA Chairman Sir Alastair Morton, on whom many hopes of frontline industry leadership were pinned when he was appointed early in 1999, is poised to stand down. Rail Regulator Tom Winsor is entrenched in a battle with Railtrack over its performance and its responsibilities, although regulatory pronouncements seem almost irrelevant against the enormity of the task facing the infrastructure company.

The cost of major investment projects has escalated far beyond anyone’s predictions (p597), with the ultimate test case of the West Coast Main Line modernisation programme now heading for £7bn against an original price tag of around £2·1bn.

Project costs have been inflated by several factors, including the effects of media hysteria about safety following accidents at Southall in 1997, Ladbroke Grove in 1999 and Hatfield last year. Public inquiries into Southall and Ladbroke Grove have so far generated three major safety reports with 221 formal recommendations, and a fourth, covering ’factors which affect safety management and the appropriateness of the current regulatory regime’ is expected this month. No doubt this too will include recommendations that will add further costs into a business whose competitors on the roads consistently escape the draconian safety standards expected from rail.

The collision at Great Heck on February 28 this year highlighted the scandalously different treatment applied to road and rail. A GNER IC225 hit a road vehicle that had run off the side of a motorway and down an embankment on to the track, and then collided with a freight train, causing the deaths of six passengers and four train crew. No public enquiry was required, and there was no serious call for roadside barriers to be fitted to prevent similar accidents happening.

What now?

Given this gloomy panorama, what hope is there for rebuilding an efficient railway able to win traffic from road and air? Although officially there are no formal plans to unravel the tangle to give a simpler and more manageable structure, sooner or later reform is inevitable. This is bound to take time because of the need for legislation, and further reorganisation will not be welcomed by all parties in the industry.

Sir Alastair Morton said in June that ’since our railways are in trouble, we shall not get it right by putting too much pressure on a structure already in trouble’. He called for the industry ’to consider solutions either confirming or modifying the existing structure of relationships.’ Wholesale renationalisation is not on the agenda, but at the very least, some form of consolidation to reduce the number of companies running the business would seem likely. One obstacle to restructuring is the government’s desire for quick political benefits, although how it expects these to be achieved in an industry where it took a year for Virgin Trains to get three clocks installed at London’s Euston station remains a mystery.

The freight business, while not immune from the troubles afflicting the passenger operators, has reasonable prospects for growth (p601), subject to the vicissitudes of the economy and Railtrack’s co-operation.

Except on inter-city routes, passenger traffic has shown remarkable resilience in the face of poor performance, and this summer has seen a drive to win back lost business with the first national rail advertising campaign supported by all train operators since privatisation. The annual count of London commuters in December and January showed that an average of 466920 passengers arrived in London between 07.00 and 09.59 on weekdays, the highest figure since the late 1980s. Whether this growth will continue depends on the country’s ability to weather economic recession.

Despite the government’s failure to provide clear targets or leadership, and even in the face of the policy vacuum caused by Byers’ decision to concentrate on the short term, the resilience of freight and passenger customers suggests that huge growth could be achieved if performance and service levels could be significantly bettered. For the moment, the railway can only muddle on in the hope that a policy uniting the industry towards a common goal will emerge in the course of time.

CAPTION: Prospects for augmenting or replacing GNER’s IC225 fleet have diminished, following the government’s decision to delay the award of a 20-year franchise to operate inter-city services on the East Coast Main LinePhoto: Quintus Vosman

CAPTION: Despite investing £150m in a network of new terminals and trains, Royal Mail is considering whether to abandon rail for all postal services, due to its inability to achieve the required 95% of arrivals within 10 min of scheduled timePhoto:EWS

CAPTION: Hopes for recovering lost inter-city business on the West Coast Main Line are pinned on Virgin Trains’ Pendolino fleet, due to enter service from March next year

For detailed coverage of what is happening on Britain’s railways, subscribe to our specialist fortnightly newsletter

Rail Business Intelligence

Call +44 1444 475630 or fax +44 1444 445447

The end of the experiment

When Transport Secretary Stephen Byers announced in July that the Strategic Rail Authority should concentrate on short-term franchises, it signalled the collapse of investment plans pinned on a long-term refranchising programme. Railtrack’s inability to manage major projects or provide accurate costings for infrastructure improvements, plus the chaos that followed the Hatfield derailment last October, suggest that the structure of Britain’s privatised railway is deeply flawed. Although unravelling the complex legal tangle governing relationships within the industry is not on the official agenda, it is clear that a simpler structure is needed. Passenger and freight operators are meanwhile striving to raise performance and service standards

La fin de l’expérience?

Lorsque le Secrétaire aux Transports Stephen Byers annonçait en juillet que la Strategic Rail Authority devait se concentrer sur les franchises de courte durée, il signalait l’effondrement des plans d’investissement attachés au programme d’attribution des nouvelles franchises de longue durée. L’incapacité de Railtrack à mener des projets importants ou à fournir des chiffres précis pour ce qui concerne les améliorations de l’infrastructure, le tout ajouté au chaos qui a suivi le déraillement de Hatfield en octobre dernier, sont autant d’éléments qui laissent à penser que la structure des chemins de fer privatisés de Grande-Bretagne est profondément imparfaite. Bien que démêler l’imbroglio juridique complexe qui régit les relations au sein même de l’activité ferroviaire ne figure pas sur l’agenda officiel, il est clair que l’on a besoin d’une structure plus simple. Pendant ce temps, les opérateurs voyageurs et fret se démènent afin d’améliorer le niveau des performances et du service

Das Ende des Experiments?

Als Stephen Byers, Sekretär für Verkehr, im Juli ankündigte, dass die Strategic Rail Authority sich auf Kurzzeit-Franchisen konzentrieren sollte, war dies das Zeichen für das Ende von auf einem langfristigen Refranchisierungsprogramm basierenden Investitionsplänen. Die Unfähigkeit von Railtrack, Grossprojekte abzuwickeln oder genaue Kosten für Infrastrukturverbesserungen anzugeben, sowie das letzten Oktober der Entgleisung in Hatfield folgende Chaos zeigen deutlich, dass die Strukturen der privatisierten britischen Eisenbahnen schwerwiegende Fehler aufweisen. Obwohl ein Entwirren der komplexen rechtlichen Verflechtungen der Beziehungen zwischen den Unternehmungen in der Branche nicht auf der Tagesordnung steht, ist es klar, dass einfachere Stukturen notwendig sind. In der Zwischenzeit bemühen sich die Personen- und Güterverkehrsgesellschaften, ihre Leistung und Angebotsqualität zu steigern

?€El fin del experimento?

Cuando el Secretario de Transportes brit