HS2 construction and Lumo success brighten uncertain landscape

The rail industry faces a financial crisis, with revenues permanently depressed as a result of the pandemic and costs exploding as a result of inflation; as a striking example, the price of traction electricity has doubled. The state of the industry is in many ways a microcosm for the state of Britain.

There is also an industrial relations crisis, with no end in sight to the current disputes. The industry’s workforce faces the same cost of living pressures as everyone else, and many on the front line are not particularly well paid, even though they are generally better paid and have arguably easier jobs than, say, staff in care homes. In contrast, train drivers are generally very well paid – but of course they will naturally fight to maintain their standard of living, after no pay increases during the pandemic.

The Trade Unions are in an unenviable position; there is no clear route to a settlement but all-out strike action will probably lead to defeat. They continue to take periodic strike action but this puts little or no pressure on the Government as the country had a crash course in working from home during covid lockdowns. Even the revenue loss is to some extent mitigated by people shifting travel to before or after strike days.

Despite the flexibility of working from home, many people do of course suffer real hardship as a result, especially those in less well paid jobs who have to get to work. But the better off generally suffer less, so South Western, a network with a high proportion of white collar and managerial commuters, has lost more business than other Train Operating Companies, with peak volumes at only 53% of pre-pandemic levels; overall passenger numbers are better at 69%, reflecting the stronger recovery in leisure travel, but this still leaves an enormous hole in the income for one of the biggest parts of the network.

The management structure of the industry is creaking at the seams too. Government has effectively taken control of Network Rail and the “franchised” passenger operators, and even minor decisions have to be sanctioned by Whitehall, let alone making any offer to break the industrial relations logjam. Even worse, receipts have been going straight to the Treasury, with DfT responsible for costs. 

The first Bob Reid, without question the pre-eminent railway manager since the Second World War, over time transformed the industry by giving it a business focus, first through the introduction of business sectors, then the “Organising for Quality” structure which gave bottom line responsibility to around thirty sub-sector managers. When he became Chief Executive, his was the only position in the industry where costs and revenues came together – today, costs and revenues only come together with the Prime Minister! Whoever it is this week is unlikely to spend too much time considering the trade-offs between frequency and revenue on the South Western Main Line.

The pre-privatisation structure was much more effective than the present mess. In the last years of its existence, British Rail was given an annual cash limit and left to decide how best to manage within this. There were only a handful of railway civil servants at the Department for Transport and they didn’t have the time or inclination to double guess the industry’s managers.

There are also systemic issues within the civil service generally. Kate Bingham, who led the outstandingly successful Vaccine Task Force, has given a devastating critique both of her political masters and of civil service micro-management: “it’s not that the people are bad or not hard working….they can write papers and policy documents but it’s not clear to me how useful that is unless you understand the content of what it is you’re doing”. She was stunned by the lack of relevant expertise in Whitehall: “Being in the business department and not understanding industry I thought was pretty shocking

Ministerial leadership has chopped and changed with increasing frequency too. Liz Truss appointed Anne-Marie Trevelyan as Secretary of State at the start of her premiership. By all accounts she made a good start, with a willingness to listen and a no-nonsense approach but she was gone after fifty days together with her Rail Minister, so a new ministerial team will be starting from scratch.

Meanwhile, the Williams-Shapps plan is withering on the vine, with no Railways Bill this year and no effective action to drive through any change. There is no electrification programme – crucial for delivering a carbon neutral railway – and no discernible policy to support mode shift to rail, the most environmentally friendly transport mode. Germany and Spain are suffering similar inflationary and financial pressures as Britain, but have both made access to their regional networks free or at peppercorn prices, filling trains and driving modal shift. In contrast, in Britain nothing has happened at all with fares reform. I question whether there is real commitment within the present Government to meeting zero carbon.

It’s also quite likely that the industry will be hit by major cuts in capital spending as part of the Autumn Statement, now scheduled for 17th November. Some spending cuts appear inevitable, but cuts to the National Health Service, education, pensions and benefits are all extraordinarily difficult and politically toxic – by comparison, slowing down or curtailing the scope of HS2 may be a relatively easy target. 

With so much work already in hand, it’s to be hoped that Phase 1 is completed, together with Phase 2A, the extension to Crewe, which makes business sense and avoids a major pinch point in the Stafford area, freeing up capacity for freight. However, the Crewe -Manchester section will see relatively few trains: perhaps three trains an hour from London and two marginally profitable trains from Birmingham. The route involves a long tunnel through the Manchester suburbs and highly expensive new dead-end platforms at Manchester Piccadilly. Perhaps, like the Golborne Link, this section will be kicked into the long grass? 

There is one shaft of light amidst the gloom. The new “Lumo” open access service between Kings Cross and Edinburgh appears to have genuinely expanded the rail market, rather than abstracting from LNER; for the first time in a generation, rail now has a bigger share of London – Edinburgh travel than air. Given the right conditions, rail can deliver.


Photo credit: Paul Bigland.

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