Published: 24th June 2016
The EU membership referendum result has raised many issues across the political, business and social spectrum. Here, rail.co.uk has a quick look at what the decision MIGHT mean for the UK rail industry. With the emphasis on MIGHT and we have spilt possible ramifications under different headings!
Rail privatisation was introduced from 1 April 1994 in response to European legislation to split operations from infrastructure in accounting terms. Some EU members decided to create two rail companies, to technically comply with the legislation.
One company ran the infrastructure, such as Railtrack, then Network Rail in the UK while the second company operated the trains. The John Major Government decided to split British Rail into over 100 companies in the 1993 Railways Act thus creating mayhem for the industry, passengers and freight customers.
The question to ask is: Will BREXIT mean the end of rail franchising as their will no longer be a requirement for separation of rail industry accounts and theoretically the government could end franchising and return to one railway authority.
And if there is a General Election with a change of Government, will they allow another Government Department to bid for a franchise if the system is continued?
The franchising system has been constantly criticised by sections of the railway, politicians and passengers. The two franchises that have are in the process of being let at the moment, West Midlands and Southwestern are both down to just two bidders each. This goes against the Department for Transport’s (DfT) aims of having at least three bidders for each franchise and having a proper ‘competition’. A bidder may well spend up to £20million on a bid which is deterring a wider field.
It is well known, and a frequent cause of comment, that many of our rail franchises are operated by non-UK based companies. For example, Arriva Trains is owned by Deutchse Bahn and they run Chiltern Railways, Cross-Country, Arriva Trains Wales, London Overground Railway and Grand Central plus DB Cargo the largest UK freight company.
Keolis is a French company whose majority shareholder is French Railways (SNCF) and is heavily involved in London Midland, Southeastern, Govia Thameslink Railway and London’s Docklands Light Railway.
So the European influence in our UK rail franchising system is huge and the question now to be considered is will non-UK companies be allowed to bid for further rail franchises? The DfT has recently issued ‘Franchise Passports’ which allow companies to pre-qualify to receive an Invitation to Tender (ITT).
Then we also have the Dutch Railway influence via Abellio who operate the ScotRail, Greater Anglia and Merseyrail franchises.
Colas operate the Network Rail track and infrastructure trains and they are French owned.
The boom in rail travel is because of the franchising system some argue while others it has happened despite the system! Whatever the answer it is undeniable that the number of UK trains operating has grown and it is also a fact that we now have more new trains than for many decades.
These trains have been built by German company Siemens, Japanese company Hitachi and Canadian company Bombardier and none by UK owned companies.
Hitachi opened their assembly plant in Newton Aycliffe in September 2015 with the stated aim of building trains for the UK and European market and it was a key decision was made to put their European HQ in the UK.
Siemens build their trains in Germany and they are imported by rail through the Channel tunnel.
Bombardier use Derby Works as their construction base. Knorr-Bremse are a German company who run Wolverton and Springburn railway Works employing over 500 people while a similar amount are also employed around the UK on rail-related business.
Many of our trains were built between 1999-2004 by Alstom the French company but these were not a success and they failed to win any more orders. Alston has just gained planning permission for a rail factory near Wigan, but will they now actually build it?
Spanish manufacturers CAF have won some orders for new sleeper carriages and other trains, how might these be affected by the vote?
The question to ask is how will these non-UK companies fare in a UK that is out of Europe?
The UK railways are safe and this is largely due to the onerous safety rules and legislation. But, it is thought that a lot of the cost of our railways is due to implementing Technical Standards for Interoperability or TSIs as they are known as decreed by the EU. It is clear that some of these standards cannot apply to some of the UK railways so therefore are a waste of money.
The clear example is Crossrail, Elizabeth Line should have been built to European TSIs but the Crossrail executive team argued that European rail services would not be operating through the tunnels so it was pointless building the line to TSI levels.
This was a sensible strategy but the counter argument is that when train builders and designers built a train compliant with TSIs, they could be operated across Europe as they were compliant with each country’s railway.
A new TSI to be introduced in October concerning lighting on trains will mean Bombardier will not be able to build any more Class 387s or other ‘Electrostar’ branded trains as they will not be compliant with the new standard.
EU legislation was also designed to encourage what is known as ‘Open Access’ operators. These range from Grand Central and First Hull Trains to West Coast Railway Company. Without the EU rail legislation, the right to operate these services did not exist and this part of the market has boomed.
Perhaps the best known Open Access Operator is Eurostar. Will the London to Amsterdam service now operate from next year with the uncertainty?
This is also operated by DB, will this change?
The trading relationships with Europe will have to be renegotiated and of course should a trade war break out with restrictive tariffs imposed, then the cost of our railways may well rise as they are largely operated by EU based companies and ALL trains manufactured by non UK companies.