Rail Freight: an industry in crisis?

A commentary on “DfT Rail Freight Growth & Modal Shift Study 1st September 2016” (prepared for the Department for Transport by Aecom Arup) SRC comments in Italics

The Department for Transport (DfT) commissioned this report in 2016 to help it to understand the future growth potential in the UK rail freight market, in particular the scope for modal shift from road to rail. The study also investigated the policy measures required to realise this potential and assess the reduction in carbon emissions these measures may bring. One of the background drivers to this report has been the greater than expected rate of decline of traditional markets, especially coal movements, which has resulted in industry and government needing to respond through exploiting opportunities enabled by this decline.

The rail freight sector now faces a situation where its ability and rate of innovation and growth of other markets needs to be significantly increased in order to fill the volume and revenue gap. This is crucial to provide the required revenues and profits in order to develop additional traffic opportunities to meet both its own, its customers, and Government objectives. In addition to the structural changes facing the industry, rail freight needs to become more agile at competing with the main transport mode in the United Kingdom: road haulage.

Comment: In short, the rail freight industry was well suited to the bulk transportation of heavy raw materials but struggles to compete in a logistics market focused on consumer goods where economy, flexibility and reliability are key. Without government investment in infrastructure and financial support, and without a massive change in culture and operating habits within the industry itself, the rail freight industry will struggle to deliver on the Government’s aspirations of modal shift and carbon reduction.

The report examines the existing markets for rail freight; how potential growth is constrained by the existing capacity of the network; it makes forecasts based upon these identified constraints; it considers a number of potential solutions to overcome these barriers to growth and also what effects the solutions will have on modal shift and carbon reduction. The final chapter prioritises 10 key interventions. Some of the key aspects of the report are reproduced below:

Existing Markets & Forecasts

In contrast to the Network Rail Freight Market Study (FMS) 2013, in which rail forecasts were unconstrained, more realistic future predictions are made taking into account network constraints. This has resulted in predictions for some commodities that are less than 15% of the unconstrained forecasts.

Comment: The unrealistic and unjustified claims being made by Developers of the need for myriad RFIs in the same locality can now clearly be challenged based on demand alone. The authors of the report are keen to point out that the predictions should be seen as complementary to the FMS modelling whilst common sense would dictate that the FMS figures should be superseded as they bear no relation to the modal shift that can actually be achieved.

The commodities traditionally transported on the rail network are mostly predicted to continue their decline (and coal to disappear completely) with only construction materials predicted to increase. There is the potential for rail freight increases in a limited number of areas including domestic intermodal, port intermodal, automotive and construction. Growth of freight via the channel tunnel is likely to be limited in the short term and unknown in the medium term due to continued social and economic uncertainties.

With respect to Port Intermodal (sea port to inland terminal) whilst there is some capacity at terminals and on certain routes, significant growth in this sector would test the limits of the infrastructure both on the rail network, in the ports and at terminals. Existing terminals will require capacity enhancements, new terminals will need to be developed to match demand and there will need to be more capacity and paths for freight trains on the wider rail network.

Intermodal Domestic (transfer of goods between inland terminals) is somewhat of a niche market and requires bespoke logistics solutions to be crafted by a multiplicity of suppliers in the logistics chain, controlled by individual large clients, who through their purchasing power are able to achieve considerable benefits from using rail. Furthermore it requires regular, stable volumes and sufficient critical mass to justify trainload operation for individual clients. Mode Shift Revenue Support grants are available from the government to support these movements (in fact the industry is reliant upon them), but domestic flows currently receive only a small proportion of the available funding. Growth in this sector has not occurred as predicted in the FMS 2013 model. Comment: this niche is currently restricted mostly to the route between by DIRFT and the Scottish terminals and, with the current on-going expansion, DIRFT’s domination of the intermodal market is likely to continue.

The express freight (or parcel) market (that Rail Central has been promoting as a major selling point) was deemed to be too insignificant to merit modelling. It is an unproven market and will never be of sufficient magnitude to significantly contribute to the modal shift that the Government seeks.

Whilst the total tonnage lifted by rail freight may have increased in the last 15 years, it has actually decreased in the last 30 years. Additionally, freight lifted in 2016 was at its lowest point for 30 years.

The report does not consider the possible impacts of the European Referendum held on 23rd June 2016. It is too early to consider the effect that leaving the EU will have on the UK economy and consequently on UK rail freight. This report therefore assumes a steady but small economic growth trend continuing over the next 5-15 years. It also identifies a noticeable shift in the centre of geography for rail freight. With the reduction in coal traffic a greater proportion is now concentrated into the already busy southern half of the country, presenting additional challenges for the industry and its funders.

Network Capacity

This section outlines the capacity constraints that have been taken into account to constrain the growth forecasts under the main categories of: Infrastructure Capacity; Route Capacity; Terminal Capacity; and Resource Availability. Under Infrastructure Capacity, a number of operating issues which act as constraints to efficient rail freight operations were covered, including train lengths, electrification, axle loads, diversionary routes, traffic mix, gauge clearance and route speeds. A summary of the issues for each of the main corridors are covered.

The WCML is the core freight route to the north west of England and Scotland, and 43% of all UK rail freight traffic and 90% of all intermodal traffic travels over it at some point. The route modernisation completed in 2008 led to an increase in passenger services, and the route is now at full capacity in peak periods. HS2 may provide some additional freight capacity between London and Crewe by diverting long distance passenger trains and running others at slower overall speeds. It will be important to ensure that sufficient additional freight capacity is provided as a dividend from the project, and that passenger operators do not take all of the paths that are released. Comment: HS2 will not be completed before 2033 and then only as far as Manchester. Freight travelling to or from destinations further north may well remain subject to existing capacity constraints.

Rail has demonstrated a requirement for large, steady shipments which provide ‘critical mass’ to underwrite the sending of the entire train. This minimum size requirement limits the number of firms which can use the railway to large distributors, and even these firms find the inability to flex the load size means that road haulage is often the fallback for adjustable capacity. This is particularly the case with regard to domestic movements.

Identified barriers to modal shift

15 Barriers to modal shift are identified under the following main headings: infrastructure capacity, cost barriers, flexibility concerns, awareness and attitude, skills and training. These 15 barriers represent a range of different issues affecting rail freight. Some can be overcome through targeted infrastructure investment, whilst others will require operational changes and a shift in mindset both of the railway industry and those seeking to move freight.

Carbon and intervention modelling

Comment: Chapter 7 provides a methodology for modelling potential carbon reductions and gives an indication of the savings that may be made from the targeted interventions. This is a national analysis and as with any model is dependent upon the quality of the inputs and the assumptions made. For example: electric trains are deemed to have zero environmental impact; the carbon cost of building the RFI is ignored (even if 75% of the warehousing is only ever road-served) and no mention is made of the additional carbon impacts of workforce movements where a rail interchange is remote from available labour). The report does state that the modelled figures are unlikely to be achieved and a more modest outcome is likely given the changes and investment required to achieve the ultimate outcome. There is no mention of individual developments having to prove their carbon footprint: SRC strongly believe that carbon justification should be a requirement of any new application. Developers can currently claim that just by building it they will be having a positive carbon impact and this is not necessarily the case.

Targeted Interventions

The top 10 interventions are detailed in the document and these include: capacity and gauge enhancements; alternative locomotion; financial assistance; rail freight conference; freight path improvement; channel freight review; large project procurement; studies into supply chain solutions; and strategic freight network.

However, in terms of supporting freight growth and generating strong carbon reductions the building of new terminals has been identified as probably the most positive strategic action that can be taken. The report recognises the need for national coverage but stops short of recommending how such terminals should be spatially located, the number required and the timescales with which they should be brought on-line. The report does, however, state the following:

– New terminals need suitable brownfield or Greenfield sites, and those which have previously been used for rail purposes are more likely to be able to connect effectively into the national network.

– The changes we are seeing in the economy are releasing a number of rail-connected brownfield sites that would be ideal for future rail freight terminal use – former power stations and MOD depots are obvious examples. To put some names to this as examples, Didcot, Rugeley and Ferrybridge power stations and MOD Bicester all have excellent rail and road links and are ideally suited as rail-based distribution hubs.

– Some existing terminals may have been run-down as their original purpose (such as shipment of a single commodity) has changed or ceased. There is the potential for these to be re-developed, where suitable, into rail freight terminals more relevant to the needs and requirements of the modern freight industry. Sites which are losing their core operation (such as power stations) may provide good opportunities for private sector development. Converting an already rail connected site significantly reduces the time needed to develop new viable rail business, and removes the considerable costs involved to create new network connections.

New terminals need to be located on routes with good freight capacity, and W10/12 gauge capability to make them attractive to the market. It is also important that new terminals have high quality infrastructure connecting them with the main line network, to ensure that maximum length trains can enter and exit as efficiently as possible. This will ensure that specific terminal capacity constraints are avoided. Developers building terminals could be influenced to locate them where rail is accessible.

“Rail-connected distribution centres could be a game changer as they’d dramatically reduce the costs of using rail freight by removing the road leg from the terminal; bringing distances where rail is competitive with road down to about 150 miles rather than 300”. – An Experienced Rail Freight Expert (not identified). Comment: If this is true this still leaves only the Scottish ports able to economically service Rail Central.


To assist in the successful delivery of the strategy, the private sector requires stable and clear policy statements backed up by subsequent delivery of specific enhancements and initiatives.

The government has stated its belief that as the number of high quality intermodal terminals around the country increases, more internal flows from terminal to terminal will become viable, diverting trunk traffic away from the road. This will, however, depend on there being sufficient terminals with coverage across all the major UK regions.

Comment: The key word here is BELIEF. Success is dependent upon many interactions in a complex and distressed environment. Clear policies have to be in place prior to sanctioning the building of multiple rail freight interchanges that may well end up as road-based logistics facilities if all stakeholders fail to rise to the challenge. The proposed solutions to the problems in the rail freight industry all require government commitment and significant funds, neither of which have yet been secured. With significant capital investment being channelled in to HS2 (and other major strategic infrastructure) and the Government clamping down on new capital expenditure, the future remains uncertain. Until firm decisions are made on if and where to invest in rail infrastructure improvements how anyone possibly know where strategic rail freight interchanges are best located.