Fast Track for Growth - RSSB · The Rail Supply Group ... Weaknesses ... RSG Council Co-chairs Secretary of State for Transport Secretary of State for Business,

Fast Track for Growth

UK Rail Supply Industry

SWOT Analysis

Contents

1. Introduction ....................................................................................................... 1

The Rail Supply Group ................................................................................................. 1

Rail Supply Group vision ............................................................................................. 1

Rail Supply Group structure ........................................................................................ 2

This document ............................................................................................................ 3

2. About the rail industry ........................................................................................ 5

Global rail industry trends .......................................................................................... 5

The importance of the UK rail industry ...................................................................... 8

3. UK rail industry SWOT ...................................................................................... 12

Summary SWOT ........................................................................................................ 12

Strengths ................................................................................................................... 13

Weaknesses .............................................................................................................. 15

Opportunities ............................................................................................................ 25

Threats ...................................................................................................................... 29

4. Conclusions ...................................................................................................... 33

Scope boundaries ...................................................................................................... 33

In conclusion ............................................................................................................. 33

1

1. Introduction

The Rail Supply Group

1.1 The Rail Supply Group (RSG) was set up in mid-2014 as a partnership between

government and industry to strengthen the capability and competitiveness of

the UK rail supply chain to grow business at home and abroad. The RSG is

jointly supported by DfT and BIS and is funded through the FutureRailway

programme.

1.2 The RSG aims to lead the renewal of the UK rail industry by providing

leadership, direction and support so the UK rail industry can grow

employment, market share and make a significant contribution to the UK

economy by exploiting these opportunities for innovation:

Rail Supply Group vision

1.3 RSG are currently embarking on the development of an industrial strategy for

the UK rail industry supply chain, due to be published at the end of 2015. As

UK: is undertaking its biggest modernisation programme for over a

century. Over £38bn is being spent in 2014-19 to maintain and improve

the network, with a strong pipeline of projects into the 2020s.

New markets: for instance, the transition to a Digital Railway presents

new opportunities for developing export markets.

New drivers: the biggest regional railway supply market in the world –

Western Europe – is on our doorstep, but Asia-Pacific will move ahead

in the next few years, while the Middle East and North American

markets offer considerable opportunities.

Europe: ambitious, long-term EU goals, such as tripling the length of the

European high speed rail network by 2030.

Global: the world’s rail supply market expected to grow by a healthy

2.7% p.a over the next 6 years.

Source: Fast Track for Growth A Vision for the UK’s Rail Supply Industry

2

part of the strategy development process the RSG has already published a

vision statement1.

1.4 The RSG vision sets out a 2025 ambition to:

1. More than double export volumes.

2. Attract the very best UK talent to create a sustainable skills base and to

develop new technologies.

3. Harness the energy, drive and innovation of SMEs to meet the needs of the

global railway market.

4. Be a global leader in High Speed Rail.

5. Have an entrepreneurial supply chain that constantly innovates to meet

customer needs, from urban to intercity networks.

Rail Supply Group structure

1.5 The RSG is structured into five work streams to explore each element of the

vision, with six cross-cutting themes:

Source: Fast Track for Growth: A Vision for the UK’s Rail Supply Industry

1.6 The RSG Council is drawn from across industry and government. Each work

stream and cross-cutting theme is represented on the Council.

1 Rail Supply Group, Fast Track for Growth: A Vision for the UK’s Rail Supply Industry, January 2015

3

Workstream / Theme Who is involved

RSG Council Co-chairs *Secretary of State for Transport *Secretary of State for Business, Innovation and Skills *Terence Watson, Alstom UK

Exports and Inward Investment

*Andy Milner, Amey Jeremy Candfield, Railway Industry Association

Technology & Innovation

*Andy Barr, Hitachi David Clarke, RSSB & Future Railway

People *Paul Francis, Porterbrook Gil Howarth, National Skills Academy for Railway Engineering

SMEs *Paul Copeland (Siemens) *Roy Freeland (Perpetuum)

High Speed Rail *Simon Kirby, HS2 Ltd *Adam Green, Carillion

Government representatives

*Clare Moriarty, DfT *Janice Munday, BIS

Cross cutting themes

*Andy Milner, Amey *David Tonkin, Atkins *Tim Shoveller, South Western Railway *Paul Plummer, Network Rail

Secretariat Jeremy Candfield, Railway Industry Association Colin Flack, Rail Alliance

* Council Members

This document

1.7 In late 2012 FutureRailway commissioned a Capability route mapping study

which was delivered by Arthur D. Little supported by Atkins in early 20132.

This study aimed to identify and map UK capabilities which: delivered rail

strategic aims; had an attractive market demand; and showed a good fit with

UK capabilities. The study included interaction with over 100 organizations,

both in the UK rail supply chain and adjacent sectors such as aerospace and

automotive, where the UK has potentially transferable strengths. The study

analysis provides a body of available evidence to support further strategy

development.

1.8 This SWOT analysis was commissioned by the RSG to summarise the outputs

from the previous Capability route mapping analysis, augment them with

current insights and perspectives from key stakeholders, and present them in

a form which will be helpful for further strategy development by the RSG.

Similar SWOT analyses have been conducted in other sectors such as

2 Arthur D Little, Route mapping capability for GB and international rail markets, August 2013

4

Automotive3 and Offshore Wind4 to support industrial strategy development.

Thirteen interviews were conducted with RSG council members as inputs for

the analysis.

1.9 This document provides the results of the SWOT analysis of the UK rail

industry. It commences with an overview of basic factual information on the

industry, followed by the main analysis and conclusions. Reference is made

throughout to further detailed evidence available in the Capability route

mapping study and other relevant documents.

3 Automotive Council UK, Driving success – a strategy for growth and sustainability in the UK automotive sector, 2013 4 Offshore Wind Industry Council, Offshore Wind Industrial Strategy - Business and Government Action”, 2013

5

2. About the rail industry

Global rail industry trends

Sources: Arthur D Little, Route mapping capability for GB and international rail markets; UNIFE, World Rail Market Study

Forecast 2012-2017; Xerfi, World Railway Equipment Manufacturers Market Analysis 2011-16 trends

€136bn

€150bn

€176bn

African and South American rail markets will experience the fastest growth but remain significantly smaller than mature markets

€176bn 2.7% 3.5%total market size

2017-19

* 2014 to 2019

forecast market growth*

Growth in control systems*

Control Systems

Rolling stock

Services

65%Main line

12%

but growth will be stronger in control systems and services than infrastructure and rolling stock

13%LRTM

21%

10%

40%

28%

Rolling stock is the largest market segment globally:

Infrastructure

High speed10%

09 - ’11

3,4

+56%

15 - ’17

5,3

09 - ’11

4,1

+80%

15 - ’17

7,4

09 - ’11

21,5

+19%

15 - ’17

25,5

+28%

15 - ’17

22,8

09 - ’11

17,8

09 - ’11

26,0

+1%

15 - ’17

26,3

09 - ’11 15 - ’17

32,2

+12%

36,1

Source: Arthur D Little, Route mapping capability for GB and international rail markets; UNIFE, World Rail Market Study Forecast 2012-2017; Xerfi, World Railway Equipment Manufacturers Market Analysis 2011-16 trends

The global rail market is growing strongly

Freight

Mainline rail is the largest application segment…

6

2.1 The accessible global rail market is forecast to grow at 2.7 % p.a. over the

coming few years, with the total market size forecast to be 176 Bn € in 2017-

95. It has been shown to be resilient to market cycles6. Growth will be stronger

in control systems (3.5 % CAGR7) and services (3.2 % CAGR) compared to

rolling stock (2.3 % CAGR) and infrastructure (2.1 % CAGR)

2.2 Mainline rail is the largest application segment and will grow steadily as

emerging markets continue to grow and mature markets service and retrofit

their infrastructure. Light Rail, Tram and Metro (LRTM) is smaller (13 %) but

likely to experience the fastest growth8.

Source: Route mapping capability for GB and international rail markets

Longer term trends

2.3 Significant further growth is expected in rail over the coming decades. Some

recent projections suggest that global rail usage (in passenger km) will grow by

well over 200 % from 2015 to 2050 and freight usage will grow by over 125 %

(as measured in tonne km) over the same time period9. However these

projections are of course subject to a degree of uncertainty.

5 UNIFE, World Rail Market Study Forecast 2014-2019, September 2014 and ADL / Atkins analysis 6 Arthur D Little, Route mapping capability for GB and international rail markets, August 2013 7 CAGR: Compound Annual Growth Rate 8 Xerfi, World Railway Equipment Manufacturers Market Analysis 2011-16 trends, May 2011 and ADL / Atkins analysis 9 International Transport Forum, A Vision for Railways in 2050, May 2010

LRTM Very High Speed

Mainline Freight

Mainline passenger transportation is the largest

segment with 65% of the market

It is expected to continue growing steadily as

emerging markets continue to develop their

infrastructure and mature markets service

and retrofit the existing installed base

The largest freight market remains North

America

Demand in freight is driven by CIS and

Asia underscoring growing

economic activity

VHS is a mature market in developed

countries like South Korea, France and

Italy

Growth will be driven by emerging

economies like Russia or China who are

launching important infrastructure

projects

The metro segment is likely to out-perform

the global rail market as large urban

transportation systems are developed around the

world to support growing urbanization

Mainline,

65%

VHS,10%

LRTM,13%

Freight,12%

2009 market shares

Source: Xerfi based on UNIFE (2009 data), Arthur D. Little/Atkins analysis

Mainline rail is the largest rail application segment while LRTM is expected to experience the fastest growth in the coming years

2.2 International market context – Segments

2

7

2.4 There are several important trends that are expected to significantly impact

the global rail market in the longer term (10+ years), providing opportunities

for further growth and innovation10,11,12:

Disruptive technology developments: Various technical advances are

anticipated to impact the rail industry significantly, for example: digital

technology and ubiquitous connectivity which will transform customer

experience, ticketing, train operations and asset management; new

materials for lightweighting; and intelligent robotics for maintenance and

inspection

Increasing urbanization and megacities: By 2050, around 75 % of the

world’s population are expected to live in cities posing huge challenges for

transport infrastructure, and driving progress towards smart and integrated

end-to-end mobility solutions

Demographic change: Transport demand patterns are shifting: the global

population is forecast to be 9.5 Bn by 2050 with increasing ageing, a larger

middle class, and economic growth continuing to focus on the East (Asia)

and South (Latin America and Africa)

Climate change: there is an increase in the frequency and severity of

extreme weather events requiring greater resilience in transport systems

and driving tighter environmental regulation

Energy and resources: Global consumption of resources is set to triple by

2050. Whilst rail already offers advantages over other forms of transport,

technologies which enable greater energy and resource efficiency, for

example new propulsion, energy management and lightweighting

technologies, will become still more attractive in the future

10 ARUP, Future of Rail 2050, July 2014 11 ADL, The Future of Urban Mobility 2.0, January 2014 12 ADL, The Trends in Mega-trends, June 2014

8

The importance of the UK rail industry

Sources: International Transport Forum, A Vision for Railways in 2050; Rail Executive, Rail Trends ; DfT, Light Rail and Tram

Statistics ; Oxera, What is the contribution of rail to the UK economy?

1.6 bnpassenger

journey 37bnPassenger miles

+50%

19,336 track miles

Passenger miles are forecast to double over 30

years from 2009

10 % of revenue

comes from exports

Source: International Transport Forum, A Vision for Railways in 2050; Rail Executive, Rail Trends ; DfT, Light Rail and Tram Statistics ; Oxera, What is the contribution of rail to the UK economy?

The rail industry makes a significant contribution to the UK economy

Current Rail Engineering Workforce

40% electrified

Rail freight is growing

60%Increase in volume

since 199523Bn net tonne

Km

… equal to 8-9 % of the total GB land freight

50 % increase

in last 10 years

9

2.5 Rail makes an important contribution to UK prosperity and effective modern

rail services are a critical part of our national infrastructure. In 2014 the UK

railway delivered 1.6 billion passenger journeys covering 37 billion passenger

miles, 50 % higher than the mid-1990s13. The UK has 19,336 track miles

(excluding depots and sidings), of which around 40 % is electrified14.

2.6 Rail freight has grown as well; volumes have increased by over 60 % since

1995. In 2013-4, the amount of freight transportation was 23 Bn net tonne

Km, which corresponds to between 8 and 9 % of the total GB land freight15.

2.7 LRTM (light rail, transit and metro) continues to grow strongly. Since 2004/5

the 8 key LRTM networks have grown by 43 % and significant growth is

forecast in coming decades. Most of the growth to date has been realized

within London (89 % since 2004/5) compared to outside (9 % over the same

time period)16.

2.8 Using rail is more environmentally efficient than road or air transportation for

both passenger and freight journeys. Despite carrying 9 % of freight and 3 % of

passenger traffic, rail only accounts for less than 2 % of total greenhouse gas

emissions from the transport sector17.

Economic impact

2.9 The rail industry makes a significant impact on the UK economy, with a total

GVA of some £9.3 Bn and employment in excess of 200,000. The rail supply

chain itself contributes some £3.5 Bn GVA and employs around 120,000 direct

staff18:

Contribution Rail Supply Chain Network Rail TOCs & FOCs

Rail Industry Total

Revenue £7 Bn £5 Bn £12 Bn

Tax £1.6 Bn £2.4 Bn £3.9 Bn

Employment 120,000 92,000 212,000

GVA £3.5 Bn £5.8 Bn £9.3 Bn

2.10 The rail industry was resilient in the last economic downturn. Passenger

journeys increased more than in comparable European countries during this

13 Rail Executive, Rail Trends - Great Britain 2013/14, October 2014 14 RDG, Long Term Passenger Rolling Stock Strategy, February 2015 15 Ibid 16 DfT, Light Rail and Tram Statistics – England 2013/4, June 2014 17 Oxera, What is the contribution of rail to the UK economy?, July 2014 18 Ibid

10

time and while rail freight did experience a volume reduction this was less

marked than in some other European countries19.

2.11 UK rail equipment and manufacturing exports comprise only around 10 % of

total revenues (though this does not comprise the whole industry). This is

much lower than the UK automotive (60 %) or aerospace (70 %) industries. By

way of comparison, the French and German rail industries enjoy higher export

levels of approximately 20 and 50 % respectively20. Increasing exports

represents one of the major challenges for the UK rail industry.

Future UK demand

2.12 The number of UK rail passenger miles is forecast to double over 30 years

from 200921. The use of rail for freight transportation is also expected to

double over the same time period22. The growth of rail is also key to meeting

European targets that 30 % of road freight over 300 km should shift to other

modes such as rail or waterborne transport by 2030 and more than 50 % by

205023.

2.13 There are major planned investments in UK rail development in the coming

decades amounting to more than £85 Bn in total, for example:

Modernization: The government has committed to undertaking the

largest modernization programme for over a century including £38 Bn24

of expenditure by Network Rail during CP5 on electrification, station

redevelopment, capacity improvements including beginning

implementation of the European Rail Traffic Management System

(ERTMS), and further development of the Strategic Rail Freight

Network. In addition, 3,400 new rail vehicles, 2,500 of which are for

Crossrail, Thameslink and the Intercity Express programme, will be

procured25.

Crossrail: Crossrail is a £15 Bn investment linking Reading and

Heathrow to Shenfield and Abbey Wood using a new tunnel system

beneath London. First services are expected to start in 2017. Crossrail

will employ up to 14,000 at the height of construction and includes a

purpose-built Tunnelling and Underground Construction Academy26.

19 Oxera, What is the contribution of rail to the UK economy? July 2014 20 Arthur D Little, Route mapping capability for GB and international rail markets, August 2013 21 Network Rail, Long Term Passenger Rolling Stock Strategy for the Rail Industry, February 2013 22 Network Rail, Value and importance of rail freight, April 2013 23 European Commission, Towards the decarbonisation of the EU’s transport sector by 2050, June 2010 24 At the time of writing this was subject to cuts of up to 20% 25 HM Treasury, National Infrastructure Plan, December 2014 26 DfT and Stephen Hammond, Annual update on Crossrail 2014, July 2014

11

HS2: Phase 1 of the programme to build a high speed rail link between

London and Birmingham represents some £24.5 Bn of investment, the

biggest single rail investment for a generation. Phase 2 from

Birmingham to Manchester and Leeds represents a further £25.7 Bn of

investment. HS2 will ultimately link 8 of Britain’s largest 10 cities and

provide new capacity, better connectivity and quicker journeys27.

Subject to the HS2 Hybrid Bill receiving Royal Assent, work on Phase 1,

from London to the West Midlands, is expected to start in 2017 and is

due to open in 202628.

‘New Tube for London’: a coordinated series of line upgrade schemes

over the next two decades, amounting to some £10 Bn of investment29.

2.14 Longer term plans, including those for Control Period 6 (which runs from

2019-2024), are provided in Network Rail’s Network & Route Specifications30.

Whilst these are not yet finalised31, and despite current short term pressures

on spending, there are indications that levels of investment in rail will

continue in the longer term, for example:

The government has recently received a report that recommended a

further twelve lines for electrification during CP632.

Transport for the North has published a report on the Northern

Transport Strategy that includes TransNorth, a vision to improve journey

times and frequencies to support the development of a vibrant and

flourishing economy in the region, an element of which is the ‘HS3’ east-

west link between the Manchester and Leeds arms of HS233.

Crossrail 2 is a £25 Bn investment in a high frequency, high capacity line

running beneath London and into Surrey and Hertfordshire. Plans are

currently being developing ready for a public consultation on the route

later in 2015. A final single option will be selected by 2017 and, subject

to a final assent by 2020, the line is expected to open in 203034.

2.15 The scale of these planned and proposed UK rail investments is

unprecedented, although with the exception of Crossrail there are still some

uncertainties with regard to their future.

27 HS2 Ltd, HS2 Plus, A Report by David Higgins, 2014 28 Ibid 29 TfL, New Tube for London Feasibility Report, October 2014 30 Network Rail, Network & Route Specifications, April 2015 31 HM Treasury, National Infrastructure Plan, December 2014 32 North of England Electrification Task Force, Northern Sparks, March 2015 33 Transport for the North, The Northern Powerhouse – One Agenda, One Economy, One North, March 2015 34 London First, Funding Crossrail 2,February 2014

12

3. UK rail industry SWOT

Summary SWOT

3.1 The table below summarizes an analysis of the key strengths, weaknesses,

opportunities and threats for the UK rail supply chain based on the available

evidence.

Strengths Strategy and planning

1 Clear long term technology strategy for UK rail

2 Significant investment proposals from government

Capabilities

3 World class capabilities in engineering consultancy and contracting

4 World class capabilities, as well as the potential to develop world class capabilities, in certain technology areas relevant for rail

5 World class capabilities in rail refurbishment, renewals and upgrades

Innovation support

6 Supportive innovation systems through Innovate UK, Future Railway and Transport Systems Catapult.

Capabilities

7 Recognition of impending skills shortage and introduction of a range of skills initiatives to counter this

Curren

Weaknesses Industry structure and collaboration

1 Lack of sufficient collaboration between clients, tier 1/2 suppliers and SMEs

2 Fragmented industry structure which can act as a barrier to innovation and leads to a lack of consistency and co-ordination in buying strategies

3 Large supplier investment decisions may not be UK based

4 Lack of clear and consistent leadership across the industry

5 Relationship between high value front end consultancy and UK supply companies

6 Lack of clear UK-based supplier rail offering to overseas customers

Route to market

7 Difficulties in bringing innovations to market due to risk aversion by specifiers (buyers) and suppliers

8 Barriers associated with company standards, understanding of needs, and product acceptance, especially for new companies entering the market

9 Insufficient UK simulation, validation and testing capacity

Capabilities

10 Aging workforce, poor diversity, changing skills requirements and difficulties in attracting new talent

Opportunities Demand

1. Strong current and future UK and global demand growth, including a large UK Rolling Stock (RoS) pipeline

2. Plans for High Speed Rail, including HS2

3. Delivery of Digital Railway, accompanied by growing global demand for ERTMS

4. New Tube for London

5. Strong UK pipeline of electrification projects, coupled with strong forecast global demand.

6. Enlarged installed base creating growing demand for spares and refurbishment

Capabilities

7. Technology transfer from other sectors where UK is already world-class, such as low carbon vehicles

Threats Demand

1 Failure to confirm long term rail investment proposals 2 Short termism and stop/start in investment due to

current industry funding mechanisms

Capabilities

3 FDI into UK providing UK with no long term benefit in terms of enhanced rail supply industry capability and capacity

4 Loss of skills through retirement and failure to attract high calibre recruits

5 Insufficient UK capacity for rolling stock supply/overhaul to meet future demands

Route to market

6 Failure to simplify and speed up routes to market

Competition

7 Continued strong global competition

8 Uncertainty over UK future in the EU

9 Competition from other transport modes and changing travel behaviours

13

SWOT analysis – Strengths

Strategy and planning

1 Clear long term technology strategy for UK rail

3.2 The UK rail industry now has a well-established and widely-known long term

technology strategy (the Rail Technical Strategy), and Network Rail has its own

Network Rail Technical Strategy. Similar strategies exist or are under

development by Transport for London for London Underground. This is seen

as an exemplar by other overseas railways, and provides a valuable degree of

clarity on long-term technology priorities which is an essential prerequisite for

investment, innovation, and strategic alignment across the industry.

References for more information:

Technology Strategies TSLG, Rail Technical Strategy, 2012

Network Rail, Network Rail Technical Strategy, June 2013

Franchising and Rolling Stock Procurement

House of Commons Note SN3146, Railways: Rolling Stock, June 2014

DfT, The Brown Review of the Rail Franchising Programme, January 2013

2 Significant investment proposals from government

3.3 As described in Section 2 above, the UK government has major planned investments in UK rail development amounting to more than £85 Bn over the coming decades. A strong domestic investment programme will be vitally important to build UK supply chain strength and capacity, and to demonstrate the track record needed to win overseas railway projects.


UK investment proposals Section 2 above, which includes further references to source data on current UK investment plans

3 World class capabilities in engineering consultancy and contracting

3.4 The UK is generally acknowledged to have world class capabilities in providing

engineering consultancy services in rail to all parts of the world. Particular

strengths include providing services relating to:

Safety

Design

Construction

System integration

Maintenance and remote monitoring

The UK is strong in forming international networks, alliances and

collaborations. It has a number of world-class civil and structural engineering

consultancies and construction contracting companies.

14

3.5 This strength and international presence provides potentially valuable

international networks for the UK supply chain to leverage. UK consulting

advice is valued especially for its independence and objectivity, for example in

terms of recommending the best technologies and suppliers irrespective of

their location and ownership. Even if this does not necessarily always provide

immediate opportunities for UK suppliers, the overseas application of UK

practices and regulatory approaches (such as H&S regimes) by UK

consultancies can provide long-term advantage for UK suppliers aiming to

export to those markets subsequently.




Franchising and Rolling Stock Procurement

House of Commons Note SN3146, Railways: Rolling Stock, June 2014

DfT, The Brown Review of the Rail Franchising Programme, January 2013

UK rail capability assessment and capability development opportunities

Chapters 4 & 5, ‘Routemapping capability for GB and international markets’, August 2013

Detailed UK capability assessment Appendix 2, ‘Routemapping capability for GB and international markets’, August 2013

Detailed cross sector capability comparison

Appendix 3, ‘Routemapping capability for GB and international markets’, August 2013

Details of UK rail supplier capabilities P65, Vol1‘Routemapping capability for GB and international markets’, August 2013 (includes references to existing databases) FutureRailway Supplier Database prepared for Routemapping study

4 World class capabilities, as well as the potential to develop world class

capabilities, in certain technology areas relevant for UK rail.

3.6 The UK rail industry has the potential to develop world class capabilities in a

range of technology areas which are relevant for rail including:

Whole life system optimization/whole life costing

Advanced control systems

Low energy railway (including advanced lightweight materials and energy

and power management technologies)

Customer experience (including big data analytics)

Simulation and modelling

Intelligent mobility

Asset management, including retrofit and lifetime extension

High Speed Rail (based on the potential from HS2)

Train design, manufacturing and systems/sub-systems (based on the future

potential of overseas-owned Tier 1 rolling stock OEMs with significant

manufacturing and design resources in UK. However it should be noted

that currently many high-value rolling stock elements such as traction

15

systems, brakes and bogies are currently designed and manufactured

overseas).

3.7 In addition, there are technology areas in other sectors where the UK is world

class today that could be transferable to rail, including:

Robotics and autonomous systems

Propulsion systems

Advanced manufacturing

Digitally-enabled businesses and new business models

Advanced manufacturing

Customer service (e.g. in retail)

Novel materials








5 World class capabilities in rail refurbishment, renewals and upgrades.

3.8 Building on the maturity of the UK rail network, the UK rail industry has a

strong reputation and excellent global track record in refurbishment and

retrofit of railway systems, including especially brownfield developments,

upgrades and retrofits whilst minimising disruption to existing systems.

Related to this is strong technical expertise in asset maintenance and

management, including asset life extension. The demand for these

capabilities is buoyant and likely to increase further in the light of existing

network capacity constraints and ageing railway assets in developed

economies, and, in the longer term, extensive new rail operations in

developing economies.




Detailed UK capability assessment Appendix 2.16, ‘Routemapping capability for GB and international markets’, August 2013




16

Innovation support

6 Supportive innovation systems through Innovate UK, Future Railway and

Transport Systems Catapult.

3.9 The UK rail sector has a wide range of innovation support systems with

substantial funding which are already helping greatly to accelerate progress in

innovation capability and new technology development. These support

systems cover a number of different innovation functions including, for

example:

R&D programmes and competitions

Demonstration, trial and scale-up programmes

Networking and collaboration support schemes

Knowledge transfer activities

Capability development initiatives and tools

SME support schemes

Funding and co-funding

Incubation facilities


FutureRailway http://www.futurerailway.org/Pages/default.aspx

Innovate UK https://connect.innovateuk.org/web/transportktn

Transport Systems Catapult https://ts.catapult.org.uk/

Railway Industries Association http://www.riagb.org.uk/about-ria/ria-events/unlocking-innovation/

Capabilities

7 Recognition of impending skills shortage and introduction of a range of skills initiatives to counter this

3.10 The shortage of people and skills is a key problem facing the rail sector35.

However, momentum is growing to address this and, with the support of the

Rail Delivery Group and the Rail Supply Group, NSARE will publish in 2016 a

specific skills strategy that will identify the actions needed to recruit, retain

and up-skill rail workers. This will build on various initiatives already in place,

for example Women in Rail, Young Rail Professionals and Routes into Rail and

the recent focus on investment in skills and training, which resulted in the

National Training Academy for Rail opening recently and the National College

for High Speed Rail, which is due to open in 2017.

35 NSARE, Forecasting the Skills Challenge, 2013

17


Skills and training policy HM Treasury, National Infrastructure Plan for Skills, September 2015

NSARE Skills and People SWOT, due to be published 2016

NSARE, Forecasting the Skills Challenge, 2013

National Skills Academy for Railway Engineering

www.nsare.org

National Training Academy for Rail www.ntar.co.uk

Women in Rail www.womeninrail.org

Young Rail Professionals www.youngrailpro.com

Routes into Rail www.routesintorail.co.uk

18

SWOT analysis – Weaknesses

Industry structure and collaboration

1 Lack of sufficient collaboration between clients, tier 1/2 suppliers and SMEs

3.11 The UK rail supply chain has often been referred to in the past as being poor at

encouraging collaboration between different tiers, especially at the SME level.

Anecdotal evidence from several sources (references below) suggests a

culture of lack of trust and adversarial relationships, with procurement

approaches not designed to encourage innovation.

3.12 SMEs can face particular challenges within supply chains due to their size and

complexity, especially on the infrastructure side, less so with rolling stock.

Concerns raised in consultations include access to funding for SMEs (including

prompt payment), protection of IPR, and the attitude of primes especially to

collaboration and openness for innovation. Most have been highlighted

previously36. For new entrants there may be a lack of knowledge of the

industry landscape, in terms of identifying potential customers for their

product or service, and identifying drivers and needs of potential customers.

This leads to the problem of too many "solutions seeking problems".


Collaboration RIA/Rail Alliance, EIT: Scoping study for improving the Route To Market for new product/service innovations from the supply chain, focusing on Product Acceptance, March 2014

BIS, Strengthening UK manufacturing supply chains: An action plan for government and industry, February 2015

BIS, Strengthening UK manufacturing supply chains: Good practice from industry and government, January 2014

Automotive Council UK, Growing the Automotive Supply Chain: The Opportunity Ahead, March 2015

BIS, Infrastructure supply chains – barriers and opportunities, August 2011

ADL, Developing the Innovation maturity Model: Enablers characterising the levels and performance indicators, May 2012

RSSB/ADL, Investigation into how Britain’s industry can make better use of test results from other environments, June 2013

TSLG/TRSSB, Enabling innovation in the rail industry, October 2012

36 BIS, Infrastructure supply chains – barriers and opportunities, August 2011

19

2 Fragmented industry structure which can act as a barrier to innovation

and leads to a lack of consistency and co-ordination in buying

strategies.

3.13 The privatised railway system drives emphasis on robust business models and

commercial efficiency, but within this context many stakeholders need to

interact with sometimes conflicting priorities. Achieving desired overall system

objectives and benefits requires collaboration, management of often complex

interface issues, and effective overall system leadership. One effect of this is

that the costs and benefits of potential innovation investments frequently

arise in separate places, or else the returns extend beyond the limited period

of a contract (such as a train operating franchise – hence the recent

‘Innovation in Franchising’ initiative).

3.14 Procurement within the rail sector tends by nature to be ‘lumpy’ and contract-

based bespoke orders are typical rather than continuous orders for standard

systems. If there is a lack of adequate co-ordination between the (relatively

few) clients, Tier 1s can experience major short term demand fluctuations

which can lead to closure of production facilities and loss of skills. This

inevitably results in increased costs due to inefficiency within the supply chain

– some estimates suggest this may be equivalent to a 20 % cost reduction37.

More co-ordination between buyers and Tier 1 suppliers (within the

boundaries of competition rules) and a shift to working on a ‘programme’

rather than ‘project’ basis, could help provide a more continuous workload for

suppliers to justify longer-term investment in a stable presence.

3.15 Although it is acknowledged that a further significant improvement is

required, progress has been made towards achieving consistency and co-

ordination in procurement strategies. For example, Network Rail’s Long Term

Planning Process38 is designed to facilitate the strategic planning of the rail

network taking into account the views of the rail industry, funders, specifiers

and customers on the requirements to develop the network to meet future

demand. Another concrete example of collaboration in procurement that has

been well received by many stakeholders is the Long Term Passenger Rolling

Stock Strategy39 for the Rail Industry, published by the Rail Delivery Group.

The LTPRSS sets out a forecast for the likely size and mix of the national rolling

stock fleet to accommodate future passenger numbers over 30 years, based

37 ADL Stakeholder interviews 38 www.networkrail.co.uk/Long-Term-Planning-Process 39 RDG, Long Term Passenger Rolling Stock Strategy for the Rail Industry, February 2015

20

on consultations with a pan-industry group comprising vehicle owners,

operators and maintainers, Network Rail and the Rail Delivery Group.


Fragmentation McNulty, Realising the potential of GB Rail – Report of the Rail Value for money study, May 2011

The Brown Review of the Rail Franchising Programme, DfT, January 2013

Consistency and Co-ordination Network Rail, National Supply Chain Strategy Control Period 5, May 2013

http://www.networkrail.co.uk/Long-Term-Planning-Process/

RDG, Long Term Passenger Rolling Stock Strategy for the Rail Industry, February 2015

ADL/RSSB, Enabling technical innovation in the GB rail industry – barriers and solutions, April 2010

EIT, The Rail Innovation Fund, September 2012

3 Large supplier investment decisions may not be UK based.

3.16 Relative to countries such as France, Germany and Japan, the UK generally

lacks UK-owned tier 1 and 2 suppliers and manufacturers for rolling stock and

signalling, as evidenced in this study and others40. This does not mean that the

UK does not gain economic benefit from rolling stock and signalling

engineering and manufacture, as tier 1s and 2s do have significant

engineering, design, manufacturing and assembly operations in UK (and in the

case of Hitachi Rail Europe also R&D resources). Indeed, the inward

investment resulting from these operations provides a major economic

benefit. However, the key capabilities required to design and develop systems

and subsystems in technology-differentiating areas such as (for example)

traction systems, bogies, braking systems etc often reside in the overseas

parts of the global suppliers concerned, and the major global suppliers of

these technologies may make strategic investment decisions outside of the

UK. This means that it is difficult for the UK to develop alternative globally-

competitive offerings in these core areas that would be able to compete with

the incumbents.


Assessment of UK capabilities Chapters 4, ‘Routemapping capability for GB and international markets’ , August 2013

Details on UK capabilities in rolling stock manufacture

Appendix A2.10, A2.11, ‘Routemapping capability for GB and international markets’, August 2013

Strengthening the supply chain

BIS, Strengthening UK manufacturing supply chains: An action plan for government and industry, February 2015

BIS, Strengthening UK manufacturing supply chains: Good practice from industry and government, January 2014

Automotive Council UK, Growing the Automotive Supply Chain: The Opportunity Ahead, March 2015

40 ADL, Route mapping capability for GB and international rail markets Appendix A1, July 2013

http://www.networkrail.co.uk/Long-Term-Planning-Process/

21

4 Lack of clear and consistent leadership across the industry

3.17 The challenge of establishing clear overall strategic leadership across the UK

rail industry is one which has been recognised for many years since

privatisation in 1993. The Strategic Rail Authority which was in place between

2001 and 2005 was an example of an ultimately unsuccessful attempt to

provide such leadership. Following the McNulty review, the formation of the

Rail Delivery Group in June 2011 (representing the major passenger and

freight train operator groups and Network Rail), the Technology Strategy

Leadership Group (responsible for the “whole system” long term technical

strategy) and the new Rail Supply Group this year (bringing together DfT, BIS

and the supply chain) are all key steps forward in providing coherent strategic

leadership. However stakeholders in the industry still highlight the lack of a

single clear leadership entity with authority for long-term direction and

decision-making. This is seen by many as a challenge for developing the supply

chain.


The need for clear leadership


McNulty, Realising the potential of GB Rail – Report of the Rail Value for money study, May 2011

DfT, BIS, RDG, RSG, TSLG, Network Rail websites

5 Relationship between high value front end consultancy and UK supply companies

3.18 As noted in Section 3.6, UK consulting advice is valued especially for its

independence and objectivity, for example in terms of recommending the best

technologies and suppliers irrespective of their location and ownership. There

is an opportunity to benefit UK suppliers without compromising this

independence through, for example, the overseas application of UK practices

and regulatory approaches (such as H&S regimes). Deeper UK supply chain

involvement is important, as consultancy services alone represent only a

limited proportion, perhaps 10-15%, of the total cost of a new railway.







22


6 Lack of clear UK-based supplier rail offering to overseas customers.

3.19 The UK government through UKTI has an active programme to promote the

capabilities of the UK rail sector abroad, build business in the export market

and attract inward investment41. Although there are many successes, the

proportion of UK rail manufacturing and equipment exported remains low

versus overseas competitors (see Section 2 for details).

3.20 One of the main reasons for this is the relative thinness of UK-owned tier 1

and tier 2 suppliers for critical systems and subsystems (refer Weakness No 1

above). It is also observed by stakeholders that it is difficult for the UK to

make a 100% UK-based “turnkey railway” offering to an overseas buyer, at

least to the extent that competitors in for example France and Germany are

able to offer. Such an offering would require a fairly complex alliance of

different players and may be impractical. Nevertheless, there is scope for

improving the coherency of a more integrated UK offering supported by

suitable collaboration and enhanced business intelligence.


UK rail exports UKTI, The UK Rail sector – a showcase of world class expertise, May 2014

Chapter 4, Routemapping capability for GB and international markets, ADL. August 2013

Appendix 2, Routemapping capability for GB and international markets, ADL, August 2013

Route to Market

7 Difficulties in bringing innovations to market due to risk aversion by specifiers (buyers) and suppliers

3.21 It has been noted by many stakeholders that excessive risk aversion is a

barrier to bringing new innovations into the market. Often this manifests itself

in onerous company standards and slow and bureaucratic product acceptance

processes, as discussed in Section 3.22 below.

8 Barriers associated with company standards, understanding of needs, and product acceptance, especially for new companies entering the market

41 UKTI, The UK Rail sector – a showcase of world class expertise, May 2014

23

3.22 Barriers cited to bringing new products to market, especially for new

companies entering the market, include:

Standards: Many believe that standards are still too numerous,

insufficiently consistent across the UK rail industry and too prescriptive.

This can act as a barrier to innovation.

Product acceptance: Whilst changes have already been made (e.g.

Network Rail have re-engineered their new product acceptance process

in recent years), many stakeholders are of the view that the acceptance

process for new products remains a barrier, with problems such as

multiple processes across the industry, excessive bureaucracy and slow

response, and poor understanding of client needs by suppliers and

developers being commonly cited.


Bringing new innovations to the market

RIA/Rail Alliance, EIT: Scoping study for improving the Route To Market for new product/service innovations from the supply chain, focusing on Product Acceptance, March 2014


TSLG/RSSB, Enabling innovation in the rail industry, October 2012

ADL, Developing good practice in product acceptance/approval – workshop outputs, March 2013

Network Rail, Product Acceptance Transformation: System Impact Approval, October 2013



Shift2Rail, www.shift2rail.org


9 Insufficient UK simulation, validation and testing capacity

Many stakeholders both in this review and also in other studies42 have highlighted a

lack of sufficient UK testing and trailing capacity as a barrier to innovation. Research

is currently underway to investigate and develop the strategic business case for

enhanced railway testing facilities43.

For more information see:

Testing and trialing facilities RSSB, Good practice guide for testing and trialling new technology for Britain’s railways, May 2014

RSSB, Railway Testing facilities – S194, August 2014

RSSB, Pioneer review output


42RSSB, Railway Testing facilities – S194, August 2014 43 RSSB, Pioneer specification, February 2015

24


RSSB/ADL, Investigation into how Britain’s industry can make better use of test results from other environments, June 2013

Capabilities

10 Aging workforce, poor diversity, changing skills requirements and difficulties in attracting new talent

3.23 Although rail is not unique amongst engineering-intensive sectors in having a

skills gap, there is some urgency in ensuring the gap is met both to maximize

the value derived from the major planned investments, and to provide the

necessary platform for future growth. NSARE report that a significant portion

of the railway engineering workforce will need to be replaced in the coming

years as, for example, 40 % of those involved with rail vehicles are over the

age of 50 and 22 % over the age of 5544.

3.24 Improving diversity is also important for the future. The rail sector has been

looking to broaden the diversity of its workforce45 and initiatives include

Women in Rail, a support group intended to ‘created to improve diversity in

the UK rail industry through providing networking opportunities and support

for all women within the sector, encourage undertakings and stakeholders to

adopt diversity as a business strategy and devising initiatives aimed at

positioning rail as an attractive career choice for young people’46.

3.25 The range of required skills for rail supply chain personnel is expected to grow

in the future - the most obvious example of this being the advent of Digital

railway and introduction of ERTMS. It will be important for training and skills

provision to reflect this changing need and also for the rail industry to attract

staff from new and different backgrounds.


Skills and training policy HM Treasury, National Infrastructure Plan for Skills, September 2015

NSARE Skills and People SWOT, due to be published 2016

NSARE, Forecasting the Skills Challenge, 2013

44 NSARE Skills and People SWOT, due to be published 2016 45 Network Rail, Network Rail’s Diversity and Inclusion Strategy 2014-2019 46 www.womeninrail.org

25

SWOT analysis – Opportunities

Demand

1 Strong current and future UK and global demand growth, including a large UK Rolling Stock (RoS) pipeline

3.26 As already detailed in Section 2 above, there is strong underlying demand

growth for both passenger and freight rail traffic both in the UK and overseas,

driven by both short- and medium-term infrastructure needs and longer-term

megatrends such as an ageing and growing population, urbanization and

climate change. This will underpin the growth of the UK and global rail

industry in the coming decades, and consequently the potential contribution

that the industry can make to the UK economy.


UK rail market context and outlook Chapter 2, ‘Route mapping capability for GB and international rail markets’, August 2013

Network Rail, Long Term Passenger Rolling Stock Strategy for the Rail Industry, Third Edition February 2015

Network Rail, Value and importance of rail freight, April 2013

RDG, What is the contribution of rail to the UK economy?, July 2014

BIS, Infrastructure supply chains: barriers and opportunities, August 2011

European Commission, Towards the decarbonisation of the EU’s transport sector by 2050, June 2010

Global rail market forecasts UNIFE, World Rail Market Study Forecast 2014-2019, September 2014

Long term forecasts and trends in rail ARUP, Future of Rail 2050, July 2014

International Transport Forum, A Vision for Railways in 2050, May 2010

Future of Urban Mobility 2.0, ADL, January 2014

Arthur D. Little Prism: ’The trends in megatrends’ , First Semester 2014 edition, www.adl.com

2 Plans for High Speed Rail, including HS2

3.27 Phase 1 of the HS2 programme to build a high speed rail link between London

and Birmingham represents some £24.5 Bn of investment, the biggest single rail

investment for a generation. Phase 2 from Birmingham to Manchester and Leeds

represents a further £25.7 Bn of investment. HS2 will ultimately link 8 of Britain’s

largest 10 cities and provide new capacity, better connectivity and quicker journeys.

Subject to the HS2 Hybrid Bill receiving Royal Assent, work on Phase 1, from London

to the West Midlands, is expected to start in 2017 and is due to open in 2026 .


HS2 HS2 Ltd, HS2 Plus, A Report by David Higgins, 2014

HS2 Ltd, Rebalancing Britain: From HS2 towards a national transport strategy, October 2015

26

3 Delivery of Digital Railway, accompanied by growing global demand for ERTMS

3.28 Plans for implementing the Digital Railway are being developed currently to

both improve customer experience and realise digital capacity upgrades47. The

first ERTMS installation, as an overlay of existing signals between Paddington

and Heathrow to support Crossrail, is due to be completed in 2017 with plans

for this to be extended out to Bristol by 2019 and then implemented on other

lines48.


ERTMS http://www.ertms.be

Enabling the Digital Railway https://interact.innovateuk.org/-/enabling-the-digital-railway

Rail Delivery Group, Enabling the Digital railway, 2014

ARUP, Future of Rail 2050, July 2014



4 New Tube for London

3.29 New Tube for London is a coordinated series of line upgrade schemes over the

next two decades, amounting to some £10 Bn of investment.


New Tube for London https://tfl.gov.uk/campaign/tube-improvements/the-future-of-the-tube/new-tube-for-london

TfL, New Tube for London Feasibility Report, October 2014

5 Strong UK pipeline of electrification projects, coupled with strong

forecast global demand

3.30 The government has committed to undertaking the largest modernization

programme for over a century including £38 Bn of expenditure by Network Rail

during CP5 on various improvements including electrification. Longer term plans,

including those for Control Period 6 (which runs from 2019-2024), are provided in

Network Rail’s Network & Route Specifications49. In addition, the government has

recently received a report that recommended a further twelve lines for

47 Rail Delivery Group, Enabling the Digital railway, 2014 48 http://www.networkrail.co.uk/aspx/12275.aspx 49 Network Rail, Network & Route Specifications, April 2015

27

electrification during CP650. Outside the UK, strong demand is also forecast. This is

described in greater detail in Section 3.


Demand for electrification North of England Electrification Task Force, Northern Sparks, March 2015

Network Rail, Network & Route Specifications, April 2015

HM Treasury, National Infrastructure Plan, December 2014

UNIFE, World Rail Market Study Forecast 2014-2019, September 2014

6 Enlarged installed base creating growing demand for spares and refurbishment

3.31 The installed base of railways is growing and many railways, including the UK,

are ageing51,52. Retrofit and upgrade of railway systems whilst minimising disruption

to existing systems is desirable due to lack of space and high utilisation of existing

systems and the UK is recognised for its capability in this area.


Asset Management Section 3.9 of this report

HM Treasury, National Infrastructure Plan, December 2014

Network Rail, Asset Management Strategy, October 2014

Capabilities

7 Technology transfer from other sectors where UK is already world-class, such as low carbon vehicles

3.32 As indicated above, the UK has world class capabilities in other industries that

have relevance to rail and could be leveraged better in terms of transfer of

technology, know-how and resources. Relevant sectors include aerospace,

automotive, defense, ICT and space.

3.33 The Capability Routemapping study of August 2013 identified the potential of

17 capabilities relevant to rail, considering their strategic relevance to the UK

(both in rail and non-rail industries), their current and future competitive

strengths and their international market potential. This also included a sector-

by sector review to identify transferable capabilities53 and a review of

potential opportunities in the short, medium and long term for various

capabilities – see below:

50 North of England Electrification Task Force, Northern Sparks, March 2015 51 Network Rail, Asset Management Strategy, October 2014 52 UNIFE, World Rail Market Study Forecast 2014-2019, September 2014 and ADL / Atkins analysis 53 Arthur D Little, Route mapping capability for GB and international rail markets, August 2013

28

Source: Route mapping capability for GB and international rail markets



Chapters 4 & 5, Routemapping capability for GB and international markets, August 2013

Detailed UK capability assessment Appendix 2, Routemapping capability for GB and international markets, August 2013


Appendix 3, Routemapping capability for GB and international markets, August 2013

29

SWOT analysis – Threats

Demand

1 Failure to confirm long term rail investment proposals

3.34 Whilst the proposals for investment in rail modernization are the biggest for

over a century, firm commitments beyond 5 year control periods are still

largely absent. Confidence that long term plans will come to fruition is an

essential prerequisite for investment in recruitment, skills training,

manufacturing infrastructure and innovation. Conversely, failure to commit to

long-term plans acts a major barrier to supply chain development, especially

given the lumpy nature of rail procurement and the need to have

demonstrated new technologies in the home market in order to be able to

export overseas.

2 Short termism and stop/start in investment due to current industry funding mechanisms

3.35 One consequence of failing to confirm long term investment proposals is the lack of a visible, level, forward work plan. This impacts the stability of the core workforce, consistency of manufacture, and quality and efficiency of production. For example, TfL have stated that stop-start funding adds approximately 15% to their client costs54, while the Railway Industry 24 Association has estimated 20% in the case of UK mainline rolling stock55.

Capabilities

3 FDI into UK providing UK with no long term benefit in terms of enhanced rail supply industry capability and capacity

3.36 Foreign ownership of UK companies can be beneficial for UK plc provided that

it is accompanied by inward investment and long-term commitment – this has

worked well for the Automotive sector, and inward investment is also to be

encouraged for rail. However foreign ownership does pose risks: for example

foreign-owned companies typically do not invest in local technology

development in domains where they already have global leadership from

resources based in other geographies (an example would be rolling stock drive

trains which are generally developed and manufactured outside UK). The

nature of the inward investment and the conditions upon which it takes place

are key.

54 Transport for London, Powering productivity and Jobs, 2015 55 Railway Industry Association submission to Rail Value for Money review, Cost Impacts of Demand Volatility, 2011

30

4 Loss of skills through retirement and failure to attract high calibre recruits

3.37 Although rail is not unique amongst engineering-intensive sectors in having a

skills gap, there is some urgency in ensuring the gap is met both to maximize

the value derived from the major planned investments, and to provide the

necessary platform for future growth. NSARE report that a significant portion

of the railway engineering workforce will need to be replaced in the coming

five years:

Source: HS2 Skills & Capability Seminar, NSARE

S&T – Signalling and telecommunications; E&P – Electrification and plant; T&RS – Traction and rolling stock

3.38 Attracting new talent to the rail sector has been a challenge historically.

Various stakeholders suggested this was due a poor sector image turning

potential recruits away56. Following the widespread recognition and

acceptance of this issue, efforts are being made to launch initiatives to

overcome it (see Section 3.9).

5 Insufficient UK capacity for rolling stock supply/overhaul to meet future demands

3.39 Failure to commit to long-term plans acts a major barrier to supply chain

development, especially given the lumpy nature of rail procurement and the

need to have demonstrated new technologies in the home market in order to

be able to export overseas. This is discussed further in Section 3.9.

Route to market

6 Failure to simplify and speed up routes to market

3.40 Ways to address the issue of streamlining the route to market in UK rail have

been identified in numerous previous studies over the last 5 years, and whilst

56 ADL stakeholder interviews

31

progress has been made there is widespread consensus that more efforts are

needed. Further opportunities include the following:

• Driving further progress towards harmonization, simplification and cross-

recognition of standards (especially company standards) across the rail

industry’s product accepting authorities such as NR, LU and others

• Greater use of output-based or objective-based standards

• Guidance on adapting standards to facilitate innovation

• Improve the culture around application of standards in practice to avoid

excessive risk aversion

• Explore further streamlining of approaches to product acceptance and

alternative approval models, for example delegating approval of certain

classes or types of product/service to Tier 1 suppliers, creating new

incentivisation measures, or developing new approaches to acceptance

with greater independence from client organisations

• Investigation into alternative contract forms and chains of

metrics/incentives to address business model barriers


Bringing new innovations to the market

RIA/Rail Alliance, EIT: Scoping study for improving the Route To Market for new product/service innovations from the supply chain, focusing on Product Acceptance, March 2014


TSLG/RSSB, Enabling innovation in the rail industry, October 2012

ADL, Developing good practice in product acceptance/approval – workshop outputs, March 2013




Shift2Rail, www.shift2rail.org


Competition

7 Continued strong global competition

3.41 The UK government through UKTI has an active programme to promote the

capabilities of the UK rail sector abroad, build business in the export market

32

and attract inward investment57. Although there have been many successes,

the proportion of UK rail manufacturing and equipment exported remains low

versus overseas competitors. By way of comparison, the French and German

rail industries enjoy higher export levels of approximately 20% and 50 %

respectively (see Section 2).

8 Uncertainty over UK future in the EU

3.42 The UK Government has committed to holding a referendum before the end

of 2017 on a British exit from the EU58. Some stakeholders felt concerns

around the impact of Brexit and continued uncertainty were impacting

investment decisions in the UK rail supply chain.

9 Competition from other transport modes and changing travel behaviours

3.43 As noted in Section 2, by 2050, around 75 % of the world’s population are

expected to live in cities, posing huge challenges for transport infrastructure

and driving progress towards smart and integrated end-to-end mobility

solutions. This is driven in part by demographic change (the global population

is forecast to be 9.5 Bn by 2050 with increasing ageing, a larger middle class,

and economic growth continuing to focus on the East and South) but also by a

need for more environmentally friendly transport (to, for example, reduce

both energy use and carbon emissions) 59, 60, 61. This could of course be either a

threat or an opportunity for rail.

57 UKTI, The UK Rail sector – a showcase of world class expertise, May 2014 58 House of Commons Foreign Affairs Committee, The future of the European Union: UK Government policy, 2014 59 ARUP, Future of Rail 2050, July 2014 60 ADL, The Future of Urban Mobility 2.0, January 2014 61 ADL, The Trends in Mega-trends, June 2014

33

4. Conclusions

Scope boundaries

4.1 In this analysis we have focused as far as possible on those issues which

generally fall within the remit of RSG. However in some cases (for example the

issues around streamlining route to market and stability of long-term

investment commitments) resolution of the issues would require much

broader consensus beyond RSG itself. We have nevertheless included these

for completeness. One particular issue raised by stakeholders in the

consultations was the possibility of creating a single system authority for rail

to better address barriers and provide overall strategic leadership.

In conclusion

4.2 The UK rail sector is at a critical stage. It has excellent growth potential driven

not only by the UK’s own infrastructure needs but also by growing global

markets, supported by long-term megatrends. There is increasing clarity on

long-term strategic and technological ambitions, and a groundswell of

consensus on the need for better collaboration and innovation with many

initiatives already in place and delivering benefit. The rail sector is vitally

important to the UK, not just as a critical transport asset but also as major

potential source of value creation for the economy. As this analysis has

shown, the UK has several strengths to build on, but there are also potential

weaknesses and risks, many of which have resulted from previous decades of

underinvestment. Today there is a unique opportunity to take action to

ensure that the UK rail industry is able to deliver our needs for the coming

decades, as well as becoming a global leader and contributing to our economic

well-being.

Documents

Fast Track for Growth - RSSB · The Rail Supply Group ... Weaknesses ... RSG Council Co-chairs *Secretary of State for Transport *Secretary of State for Business,

Fast Track for Growth - RSSB · The Rail Supply Group ... Weaknesses ... RSG Council Co-chairs Secretary of State for Transport Secretary of State for Business,