No strategic vision for rail

Paul Salveson website

Paul Salveson on the uncertain future facing railway manufacturing

The Government has secured a last minute deal to prevent the closure of Britain’s last-remaining train building facility, in Derby. Whilst the rescue will provide some hope for the plant’s short-term future, there remain big questions over the future of train building in the UK. The 1300 workers who were facing redundancy probably have forthcoming local and, indeed, a General Election to thank for saving their jobs, rather than any strategic vision by the Government to invest in British industry.

The history of railway manufacturing in the UK is complex. Even in BR days it was common for rolling stock to be manufactured by UK-based private sector firms, including English Electric and others. However, the mainstay was the BR-owned workshops at places such as Crewe, Doncaster, Eastleigh, Swindon and Derby. These were true “railway towns” with the works employing tens of thousands of men and women, offering long-term, secure employment.

That started to change in the 1980s with closures of major workshops including Swindon, Horwich and others. A BR subsidiary – British Rail Engineering Limited (BREL) – was formed in the run-up to privatisation. When the railways were privatised in 1994 the workshops themselves were sold off, with a much-reduced BREL getting split up into several different ownerships in 1989. In the case of Derby, the main workshops were bought by ABB with a 20% management stake. In 2001 the works was sold to Canadian-owned Bombardier.

The problems began in earnest following privatisation and the loss of any strategic long-term focus by Government. The rail industry was split into hundreds of businesses, with the most obvious division being that between the train operators and the infrastructure body, Railtrack.

The train operators were franchises, the creatures of Government with very little room for manoeuvre on their own. Yet they were expected to lead on the procurement of new rolling stock. Buying a new train is not like buying a new car – it is investment for the long-term and involves massive costs. A railway vehicle will cost millions and – here’s the rub – the pay-back period for the investment is in decades, not a few years. Yet the train companies’ franchises were, typically for seven to ten years.

To complicate matters further, the post-privatisation rolling stock fleet was sold to rolling stock leasing companies, mostly owned by banks, who leased the trains to the train operators through an extremely complex (and for them, lucrative) package which formed part of the franchise agreement. So rolling stock investment was effectively under-written by Government, but without a clear long-term strategy for building trains.

Although Government had many fingers in the rolling stock pie there was never any great commitment to supporting UK-based industry. The Government hid behind EU procurement rules, while France, Germany, Italy and other European countries supported their own industries and jobs.

Many of the new trains we see on our railways today are manufactured abroad and either shipped to the UK or assembled in Britain, but without the all-important components, with huge multiplier effects across the local and regional economy of places like Derby and Doncaster, being made here. By the 2020s, the only plant capable of building a train or locomotive was at Derby, owned by French railway engineering company Alstom since 2021.

In late 2021 Alstom and Hitachi (which has an assembly plant in the North-East) won a £5.1 billion contract to design, build and maintain the new fleet of trains for HS2. Yet with the Government’s decision to cut back on HS2 and instead invest in filling pot holes, there will almost certainly be a requirement for fewer trains when HS2 is completed to Birmingham. Even so, it would be a life-line to Alstom in Derby but the lack of current orders has left the factory facing complete closure.

As far back as May 2023 Alstom raised the looming problem of a 27-month gap between the completion of current orders in early 2024 and the start of the HS2 work in 2026. We are at that stage. You can not keep a production line, and the hundreds of staff involved, running with no trains to build. The Government has raised the prospect of £3.6 billion’s worth of orders for new trains for (state-owned) Northern and TransPennine Express, Chiltern and other UK train operators. Yet there is no guarantee that Alstom would win this work and the winners in recent UK train orders have been CAF (Spain) and Stadtler (Switzerland). All of these contracts are at a very early stage and it will be years before any of these trains reach the production line.

Government is at the heart of the problem. Within England, the Department for Transport specifies contracts for most of the train operators, government-owned companies, in the minutest of detail. Trying to shift the blame for the current situation to the operators, as Labour’s shadow transport secretary Louise Haigh has said, is “disingenuous at best” and an “abdication of responsibility for protecting high-skilled jobs in a key manufacturing sector.”

What appears to have been agreed as a stopgap, to tide the Government over an election year, is a handful of new trains for London. It does not represent a long-term vision for railway manufacturing, or for railways as a whole either. What railway manufacturing needs, whether it is publicly or privately-owned, is long-term certainty and stability and a presumption to invest in UK industry, with the obvious wider economic and social benefits that would bring.

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