Four problems crisis-hit British rail must solve to survive | railway industry

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What should British Rail do to get back on track? In the brief period between strikes, Mick Lynch of the RMT was asked by MPs if an industrial strike was hurting the railways. The union leader replied, “How about the days when we are not on strike, when it is absolutely useless?”

Industry bosses also concede, in less crude language, that railways need to be fixed.

Problems mount. After huge investments in the past decade, the Treasury has indicated that it will no longer cover the rising costs. Reports that HS2 could again be delayed or ground to a halt in London – despite the chancellor’s swift denials – will add to concern about government support.

Inflation and the battles it sparked have exacerbated the financial blows from Covid, which have ripped apart divisions in the system. The crash in passenger revenue brought the franchise to an end overnight, but many franchises actually sank. Emergency contracts for train operators have kept the industry afloat, but arguably sapped its direction or momentum. The contracts underestimated the risk of success or failure – a factor in the malaise that left railway passengers in the North with particularly poor services.

There remains cause for optimism. Reliability hasn’t fallen all over the place; Reform work continues. New infrastructure was delivered, not least Crossrail, and more was promised; And passengers returned to some routes in droves. But the fate of the rail system will depend on how four interrelated issues are addressed.

industrial relations

Resolving the ongoing national strikes of the past seven months is high on the list – even if the breakdown in industrial relations is a symptom rather than a cause of the railway crisis.

At least two more days of lockdown must take place, with drivers striking rows on Wednesday and Friday this week. Drivers have the most power to stop a rail—but much less inclination than an RMT to do so.

The latter looks closer to stabilizing, as the RMT executive looks at separate 9% wage increase packages offered by train operators and network rail. Hurdles remain – not least reforms that would make Sundays a compulsory working day, and possibly allow all ticket offices to close.

Even if they win RMT’s grudging acceptance, offers of below-inflation wages are unlikely to please employees. Low morale, evidenced by high rates of disease and what frustrated Avanti chiefs call “informal industrial labour”, contributed to the failure of the train services. The Minister for Railways, Hugh Merriman, suggested managers would “need to throw their arms around the workforce” for some time to restore relations. But battles over reform – and further cuts – will continue to unfold in 2024 or 2025 unless finances ease.

Mick Lynch from RMT: Consider an offer of a 9% payment. Photo: Tayfun Salcı/Shutterstock Passenger recovery

As the Treasury can see, there is still an annual rate shortfall of £2bn from the pre-Covid days, and they are not willing to fill the gap.

The latest quarterly financial statements show that revenue from July to September was £2.2 billion – almost 30% less than summer 2019 figures in real terms. Data from the Office of Rail and Roads also shows a particularly sharp drop in season ticket sales, down more than 70% from £556m – income that has traditionally provided transport operators with a guaranteed slice of early cash.

The big question is whether this is a long-term structural change — driven by work-from-home and the death of the Monday-to-Friday commute — or just a post-pandemic lag. At first, many tended to the pessimistic view, although some, like Darren Kaplan, CEO of the Rail Industry Association, dismiss talk of “orderly decline”.

Passenger numbers reached 90% of pre-Covid levels on some days in November, with numbers on long-distance routes surpassing 2019. “People talk about commuters disappearing, but in parts of the country they’re completely back,” Kaplan says. “We’ve had industrial activity, poor service levels – if all these challenges weren’t there, imagine how much better it would be.”

Revenue from peak tickets — which commuters needed before the advent of flexible work — has been much lower than its off-peak counterparts since the pandemic. But ORR data shows that it is now recovering faster: Revenue is now 50% higher than it was a year ago for peak prices compared to 30% growth for off-peak.

The industry would like to offer more carrots to passengers, too – but attempts to fix confusing and expensive fares have stalled for years. As a senior industry source put it: “You have to have a fit-for-purpose pricing system that’s attractive and people believe in it… Can you do that while government holds the keys to day-to-day operation? Disingenuous.”

An HS2 worker outside Euston station in London. Photo: Aaron Chung/Systematic Reform

Supposed micro-management by the Department for Transport, allied with the Treasury’s portfolio holding, was a concern even in 2018, when ministers launched an industry review in the wake of a schedule disaster that sparked chaos and cancellations.

The glacial pace of the Williams revision and ensuing reforms frustrated many, especially since few were against the diagnosis: Prices were a mess; that the costs were prohibitive; that the industry was highly fragmented, with the aims of network railroads and operators, track and train, conflicting rather than unified; And this franchise wasn’t a success, even before Covid wiped it out.

The temporary post-pandemic decades have created an unholy alliance of government funding and private sector operation, with little incentive for the latter to raise revenue or run trains when the going gets tough. Carriers debate a greater role when Great British Railways, as outlined in what is now the Williams-Shapps Review, becomes a reality.

The people who founded the GBR, the independent body that will act as the “guiding brain” for the industry, insist it is far from dead, as some have asserted; But the legislation is not yet timed.

With an election due in late 2024, Labor’s plans may have more significance soon. The party is likely to agree to an independent guiding mind to run the railways; But when the contracts expire, the train operators will revert to public ownership. Given that the Southeast, North and LNER are already managed by the state operator of last resort, this no longer seems such a radical possibility.

Infrastructure and investment

In the meantime, the two main parties are ostensibly committed to building HS2 and a “Northern Powerhouse” for the railway – whatever those projects mean exactly in terms of routes and destinations.

Sir David Higgins, one of the first HS2 heads to be asked to review its budget, warned that political delays and uncertainty were the biggest driver of escalating costs. However, even the London Euston terminus of the high-speed network is still being discussed a decade later.

At a time of declining patronage and broader economic pressures, the temptation to scale back long-term plans is high. But building modern, high-speed, flexible lines remains vital. The North’s hopes have already been dampened by cuts announced in 2021 to the government’s £96bn Integrated Rail scheme. Offering that plan will still be the basic minimum.

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