Railfuture’s Freight Group head, Peter Wakefield, looks at the possible impact on the fragile and volatile railfreight market following the decision on 23 June 2016 by 51.9% of those who voted (37.4% of the electorate) in the UK’s referendum to choose ‘Brexit’.
The European Union has been a part of Britons’ lives for 40 years or so and inevitably over that time Britain’s railway freight business has been affected by the gradual merging together of UK and continental working practices that the European Commission has sort to bring about under its various harmonisation programmes. Only time will tell whether it will be necessary or even advantageous to unravel any of this informally even when formally we 'Brexit'.
Our rail freight industry is generally regarded as a success even in comparison to some of the continental networks. The latter has been reluctant to adopt some of measures that have allowed our network to adapt to ever changing market conditions.
In the UK main market segments are coal and energy, deep sea intermodal, domestic intermodal, construction, network rail works. Coal has declined rapidly this year owing to electricity generating industry deciding to close coal fire plants ahead of the 2025 deadline imposed by international treaty obligations to reduce our share of CO2 emissions. Some of the coal carrying has been replaced by biomass imports but replacing coal-fired boilers with biomass-fired boilers has not gone ahead as quickly as it was once thought it would.
Jonathan Roberts, MD, JR Consulting, writing in Railfreight Group (RFG) house journal makes the point that "continuation of coal-fired power stations for longer, might be a possible outcome (of Brexit) or more biomass, if UK no longer has to fall precisely in line with some EU policy initiatives." However, the UK government might be wary of upsetting the powerful environment lobby if the coal fired power stations were reprieved for long.
Generally then, the rail freight market will be depend on how carefully the government unravel our lives from the EU and how the market segments of respond to that. Simply put if we lose confidence in the process and should building work slow-down then less sand, gravel, stone, cement will be carried about by train; if we shop less for a while, container trains out of Southampton and Felixstowe will be fewer in number. Whether all this will happen now or in the future, we simply do not know at the moment.
Railfreight Group's Maggie Simpson speaking on behalf of the freight operating companies (FOCs), puts it this way:
"At the core, the economic position of the UK will be the critical factor in establishing rail freight’s chances of success. A prolonged recession will be damaging to our customers, and in consequence to our business. Economic growth of course has the opposite outcome if that can be achieved. In the short term, the vibrant construction sector appears vulnerable to uncertainty, and any squeeze on household spending can impact on the intermodal market. So we must urge politicians and policy makers to act swiftly to restore business confidence.
Similarly, for our import and export businesses, and ports and logistics companies, establishing a clear trade framework is an absolute priority. Whilst existing rules continue to apply up to the point of exit, those planning future growth and investment must have early sight of what the new arrangements will be, and Government must act to ensure that the lowest possible barriers to trade exist. This includes areas such as customs as well as core trade deals with other states."
Again in the house journal of the RFG, Elizabeth Dunn, Partner, Burges Salmon, examines the legal ramifications of the unravelling of our close links to our European partner railways. She points out that "On the regulatory side, the UK has to date led the development of European regulation following the privatisation of rail. As a result we are not expecting to see a substantial change in the current UK approach. However, no longer being part of the EU may allow us to take steps in the future that differ from those being followed in Europe in relation to the post-nationalised industries like ports and rail freight. One example of this could be in relation to the provision of track access for freight. At the moment the EU controls how the UK charges for its track access, Brexit could have implications for both the timing and the approach taken to the 2017 access charge review and allow for greater flexibility in relation to charging in the future."
Railfuture is a great supporter of more freight on rail. But it is competing with a resurgent passenger train network for capacity. Network Rail has many plans to cope with all this growth with projects right across Britain.
Jonathan Roberts explores the possible effect on NR's plans after Brexit should the economy falter and funding become even scarcer. He says: "Network Rail may find available funding tighter for Control Period 6 (CP6, 2019-2024). It was going to be tight anyway, with much CP5 (2014-2019) work shunted into CP6. This could affect the scale and rapidity of capacity improvement schemes such as Ely North junction on the Felixstowe-to-Nuneaton (F2N) container route, the East West Rail and Electric Spine project, and the Werrington flyover, which are designed to improve freight links to the Midlands and the North. Rail freight interests will need to press for continuing focus on urgent schemes of general importance for economic revival and area regeneration.
“A more connected UK economy supporting business revival in locations other than London and the South East can be expected to be a political mantra, so that schemes such as trans-Pennine rail freight improvements can justify their existence on this basis.
“To the extent that greater efficiency is pressed harder as a priority, longer freight trains will be an operational objective in order to improve operating economics and to lower the impact on line capacities. If passenger volume growth reduces in pace, then future line capacities will be more resilient for longer."
Railfuture as a campaigning organisation made up of members from right across the political spectrum. It must be ready join with others such as RFG to make sure our railway gets the funding to enable it to continue to evolve into modern network serving all corners of Britain and all the needs of passengers and freight users. The emerging regulatory framework must allow our railway to do just that.
Read other railfuture articles about Brexit: Brexit and the Railway, Brexit rail economics.