Published: 21st October 2016
Mixed fortunes for the UK rail industry with collapse of coal and steel traffic as Brexit and bombs hit international and freight traffic.
October has proved to be a month of mixed fortunes for the rail industry with two companies (Eurostar and DB Cargo) reducing staff and services, freight operator GB Railfreight is sold and 78 Virgin jobs attract 15,000 applicants.
Eurostar passenger numbers have been hit by the joint threat of terrorism in Paris and Breussels plus the aftermath of the Brexit vote leading to a 3% reduction in passengers and 10% less revenue. Given all train operator costs a5re largely fixed then any loss of traffic immediately hits the bottom line.
Eurostar told the highly respected Railway Gazette that it planned to reduce its train services by 8% with up to 80 jobs lost hopefully by voluntary redundancy or sabbaticals.
Eurostar has been using more and more of its new Siemens E320 trains which carry more passengers than the early 1990s Alstom built Eurostar trains so more passengers can be carrioed using less trains. While another six E320 trains have to be delivered, the original Alstom Class 373 trains are being refurbished but the company is assessing how many of the latter trains it needs for the future. Eurostar hope to operate trains between London and Amsterdam next year with a journey time of arouynd four hours each way.
It is likely that many of these will be scrapped, especially the Regional trains which were to run from Manchester via the West Coast and from Glasgow and Edinburgh via York to Paris and Brussels. It is expected that jobs will be lost amongst HQ, onboard and station staff, at the Temple Mills depot and Eurostar Contact Centre.
DB Cargo UK is the UK’s largest freight operator and has suffered with competition from Freightliner, GB Railfreight and Colas over the last decade. This combined with the collapse in the coal and steel market in the last year has turned a shortage of locomotives into a surplus of staff, wagons and locomotives.
They are proposing a potential reduction of 893 staff and more reductions in their operational fleet and depots. It is understood that all 1116 drivers have been contacted saying they will have to apply for their jobs with new terms and conditions – and that only 725 people will be offered a job potentially leaving nearly 400 redundant.
Hans-Georg Werner, CEO of DB Cargo UK, said: “Responsible and successful businesses must evolve and reshape as their markets change and sometimes this means making tough decisions. Whilst this is a difficult time for all of us at DB Cargo UK, reshaping the company will enable us to build a business for the future and protect the majority of jobs. We are fully committed to supporting colleagues who may be at risk of redundancy.
"We firmly believe in the future of rail freight in the UK. Our motorways and roads are becoming more congested and rail offers fast and clean supply chain solutions. Our new business strategy will ensure we are a perfect logistics partner of choice for customers across all sectors, including construction, automotive and intermodal, long into the future.”
No final decisions have been taken at this stage. All of the proposals are subject to formal collective and individual consultations.
Mick Whelan, general secretary of ASLEF, spoke out about the race to the bottom in the freight industry. He said: ‘Freight on rail is collapsing in this country. The news today from DB Cargo that the company plans to make 893 staff redundant – 391 drivers across all depots – is an individual tragedy for each man and woman who loses a job and a collective tragedy for our rail industry.
‘The company – which talk airily about “the business model of the past is not fit for the modern world” – has been extraordinarily slow to adapt to changing conditions. We have been saying for many months now that the loss of coal and steel meant the company needed to find new work. It didn’t. The blame for these job losses is almost entirely the fault of the management of DB Cargo. I say almost because the government has sat on its hands and watched this tragedy unfold. The government took the decisions that paved the way for the work to disappear and so it, too must shoulder some of the blame.
‘Freight is the only part of the railway that is fully privatised, red in tooth and claw, with the companies cherry picking the best jobs. It’s a race to the bottom. The only way to build freight on rail – which is by far the best, and most environmentally friendly, way of moving freight around the country – is to bring it back into public ownership.’
Whoever is to blame, it is the perfect storm of loss of coal and steel traffic plus high energy prices in manufacturing plus climate change policies bringing more cost increases plus overseas competition. DB Cargo ran around 3000 or 32% less steel trains in the first nine months of this year compared with 2015.
DB Cargo UK said it was ‘proactively investing in key areas’, including the rollout of mobile devices to front line and management staff, and the launch of interactive applications to improve fuel efficiency. It plans to further enhance efficiency and service levels for its customers by introducing order-track-and-trace, end-to-end planning and proactive and pre-emptive service issue systems and technology.
EQT Infrastructure II (EQT) has made a bid via an indirectly owned company within the Hector Rail group to buy GB Railfreight from Groupe Eurotunnel SE as an integral part of EQT’s strategy to create a leading independent pan-European rail freight operator.
GBRF was founded in 1999 by John Smith who still runs the company which is now the third largest UK rail freight operator employing 650 staff and operating over 1,000 trains a week carrying 15% of UK’s rail freight turning over £120million annually. It has a fleet of over 130 locomotives and 1,100 wagons, transporting goods for customers including Drax, Network Rail, EDF Energy, MSC UK, Aggregate Industries and Tarmac.
“We would be very pleased with EQT as our new owner and strongly believe that EQT’s industrial approach and network, extensive rail freight experience and access to capital would be of valuable support to GB Railfreight in our continued growth ambitions”, says GB Railfreight’s CEO and founder John Smith.
“GB Railfreight is a company that understands its customers, staff, and the industry in which it operates. The focus on innovation and delivery of outstanding customer service are two key factors that make us believe that GB Railfreight would be an excellent fit with Hector Rail. We look forward to working in close partnership with GB Railfreight’s management team, to support the company in its continued growth ambitions”, says Bo Lerenius, Industrial Advisor to EQT and Chairman of the Hector Rail Group.
Hector Rail is Sweden’s largest private rail freight company running trains across Scandinavia and Germany while EQT is a global private equity group with approximately EUR 30 billion in raised capital.
Virgin Trains' Hitachi Azuma trains will be introduced in 18 months or so and Virgin has advertised 78 drivers’ jobs on these trains. This attracted 15,000 applicants who will start work in January 2017 for a year’s training at depots between London and Edinburgh.
Trainees will take part in a mix of classroom-based and ‘on the job’ learning at different locations on the east coast route. Modules range from track safety, understanding operational route risks and emergency situations to getting to know the traction they will be driving.
New recruits also go through rigorous immersive practical learning including driving Virgin Trains’ state of the art simulator in order to familiarise themselves with the cab and build train handling experience.
These new drivers will no doubt be authorised to operate the new train doors thus obviating a union dispute as with other new trains being introduced – or will they? Time will tell.