www'rfg'org'ukTony Berkeley

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• From HLOS1 to Hs2
• The Challenges and opportunities for the rail
  freight industry from 2014 to 2025 and beyond
• Tony Berkeley
• Chairman, Rail Freight Group
• President, European Rail Freight Association

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My vision

• For 2015 and 2025, our vision for the rail
  network for freight is for one which
• - Provides a 24/7 railway
• Has adequate network capacity for freight to go
  where and when it needs
• Has delivered adequate terminal capacity
• Has a cost structure enabling it to compete on
  equal terms with road
• Will deliver emissions and other environmental
  savings that will make a significant contribution
  to the UKs obligations.
• Gives a competitive service offering
• Where are we now, and how do we get there?

Delivering Choice for Business
www.rfg.org.uk Tony Berkeley
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• Freight Transport
• Freight transport provides a service
  competitive between road, rail, air and sea and
  combinations of these, and by different routes
  and carriers within each mode.

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Where are the main world routes for
freight? Global flows of containers along the
principal trade routes

• Global flows of containers along the principal
  trade routes in 2002

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• Within Europe, major ports and inland connections
  by road and rail are the main surface routes
  plus rail across Russia
• ltFM for slide 5, please shade in all EU member
  states, change title to major ports and add in
  Constanta and London Gatewaygt

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Top 15 European container ports 2006
Southampton
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Principal UK ports and railways

• FM Suggest delete Tilbury and Thames Gateway and
  substitute Thames ports Delete Goole, Hull and
  Immingham and substitute Humber ports Add in
  Tyne

Delivering Choice for Business
www.rfg.org.uk Tony Berkeley
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• A competitive market place?
• Freight services are all aggressively competitive
  except parts of rail
• European rail freight markets are theoretically
  open, but many legal, technical and commercial
  barriers remain.
• Where there is a genuine liberalisation, there is
  growth. In the last 12 years
• In the UK rail freight has grown 60
• In France it has dropped by 40

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Do incumbents have a dominant position in any
rail freight sector?

• It all depends on how you define the market
  sector, but competition theory usually states
  that no one operator should have more than 30 of
  any definable market.
• In this case, in nowhere in Europe is a proper
  competitive market in rail freight achieved, even
  though the process started in 1991!

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• Chart from RIM doc p 27 freight competition
  evolution market share FM

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What is the key to the UKs rail freight success?

• Full liberalisation of access to track and
  terminals
• Effective independent economic regulation from
  the start
• Encouragement by ORR and Network Rail of new
  entrants
• Cross-party political consensus on role of market
  mechanisms and service delivery in private sector
  in freight and logistics sector
• Policy stability leading to lower track access
  charges, freight grants, RUSs.

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The dynamics of rail freight growth

• Policy stability encourages competitive entry
  into rail freight market
• RUs and customers discover commercial leverage
  and encourage competitive offers
• RUs restructure, improve existing services and
  deliver new ones
• On-rail competition leads to better service
  quality and efficiencies lead to absolute growth
  in rail freight and relative growth in market
  share.

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competition

• Policy stability encourages competitive entry
  into rail freight market
• RUs and customers discover commercial leverage
  and encourage competitive offers
• RUs restructure, improve existing services and
  deliver new ones
• On-rail competition leads to better service
  quality and efficiencies

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Rail freight demand

• We must understand the nature of demand and how
  it has developed
• Constraints remain unless public policy evolves
• Economic and societal measures needed to remove
  these constraints
• Demand derived from business activities subject
  to global price and service competition.

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Rail freight can provide

• An integral element of an industrial process
• FM new chart see sep sketch

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Flow chart aggregates

• New chat here too Not used but will not change
  the number ing system now

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Flow chart ports to inland terminals by road or
rail

• Sketch a commoditised substitutable transport
  link FM See sep sheet
• Ditto here

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Supermarket DC to DC

• Part of a complex supply chain
• Ditto FM See sep sheet

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Pressures on costs and efficiencies

• Rail freight is an input cost to be minimised
  as are other elements in the logistics chain,
  such as shipping, port charges, road freight,
  etc.
• Given the constraints of rail, efficiency
  improvements can be more difficult.
• How has rail freight compared with other elements
  of the supply chain?

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The freight market is growing fast source
Eurostat 2009
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Projected growth of EU freight traffic to 2030
Source Heriot-Watt Univeristy
Delivering Choice for Business
www.rfg.org.uk Tony Berkeley
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Competition has driven efficiencies

• Title slide

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Ports

• Maximum dwell of container 3 days now 7 days 5
  years ago
• Cranes Ports can manage 20 or more container
  lifts per hour per crane ambition is to grow to
  35-40 per hour
• How? Double container lifting or 2 stage
• Driverless container movements at ports

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ABP Example

• See separate e mail FM

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trucks
Trucks nave got bigger and can carry
more Increases in maximum truck weight since 1945
Source Heriot-Watt Univeristy Separate these two
slides just use the top one here. Not use bottom
one FM
A rail industry perspective
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Container ships have got larger, but container
trains less so
Source Faber Maunsell
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So rail has changed less!
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But rail has made efficiency improvements

• Train lengths evidence of longer container
  trains e.g. extension at Felixstowe south FLT
  from 22 to 24 wagons gives six more TEUs
• Aggregate trains from Westbury to London now
  ?3,000 tonnes, previously? FM To check?
• Gauge W10 gauge now for 9 6 boxes
• Trains speed - are they going faster? FM?
• Terminal turnaround? Faster? Evidence? FM?
• Low track force bogies earn a 10 discount on
  access charges.

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Road and rail operating costs have changed rail
less than road source?
Delivering Choice for Business
www.rfg.org.uk Tony Berkeley
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Rail turnover per employee

• Do for ews, fl h haul, fl container, drs, fgbrf
  from RIM FM

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So rail has to work harder to get efficiencies

• Due to the operational and physical state of the
  network
• It is a mixed traffic network
• Everything takes a long time, is a hassle and
  costs

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Emerging government policy-1

• Cant/wont forecast rail freight simply make
  appropriate passive provision on network (2005
  Rail White Paper)
• Through emerging policy consensus on long-term
  growth trends in rail freight and drivers of
  demand and modal choice (UK Ports Policy
  Eddington Report RFG/FTA rail freight forecasts)
• Leading to 2006/7 Freight RUS and Strategic
  Freight Network proposed in 2007 Rail White
  Paper. Major achievements-
• Comprise systematic approach to identify and fund
  network enhancement programme and capacity
  management strategies to meet medium-term
  forecasts of growth/demand for current rail
  freight commodities (coal, containers and
  construction materials)

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Emerging government policy-2

• And to the emergence of overarching public policy
  initiatives- (e.g. Regional Spatial Strategies
  2008 Planning Act 2008 2009 TaSTS/ DaSTS
  initiatives)
• - Which consider rail freight in a wider
  land-use transport planning context rather than
  only as an element in the rail policy mix (at
  worse, as a constraint on the optimisation of the
  rail passenger network!)
• - Which recognise the actual and potential
  role of rail freight to rich and green
  Sustainable Distribution solutions in the
  longer-term.

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So rail freight extends outside rail!

• Understanding the wider land-use transport
  planning context is critical with the exception
  of some industrial flows, rail freight activity
  is not contained within the rail network it
  flows through the rail network and is dependent
  on efficient entry and exit gateways or loading
  and discharge points, e.g. terminals

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Privately-owned railways in the C19th understood
this thats why they invested in freight
terminals adjacent to clusters of demand in city
centres and in ports. Bishopsgate Goods Yard,
London (NRM)
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Future demand for rail freight

• Public policy is now reviewing benefits of a high
  speed passenger line
• There will be resulting connectivity issues and
  other changes to the existing lines to benefit
  freight perhaps even higher speed freight on the
  line itself.

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One of the Greengauge 21 high speed network plans
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Rail freight demand forecasting

• We now also have the information and modelling
  techniques to forecast potential future rail
  freight.
• The following charts are for demand unconstrained
  by capacity limitations on track or terminals
• Key assumptions
• Base on Rail White Paper 2007
• Interim Ports White Paper 2007
• Energy White Paper 2007
• Freight Route Utilisation Study and using the
  GBFM (GB Freight Model) is a calibrated model
  based on evidence of actual rail market shares
• (full references on www.rfg.org.uk)

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Rail freight where does it go?2006 actual -
sum of both directions
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Rail freight trains assigned 2030
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2007 supply of freight train paths
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2030 Excess of demand over supply (80
utilisation)
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Terminals

• Rail freight needs terminals located conveniently
  for centres of consumption or supply
• Just as passengers need stations
• No terminals no rail freight!
• Planning Act 2008 includes large terminals

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10m sq m of terminals required by 2030? Miek
Garratt pl comment and send new copy of map
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Growth sectors
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Growth will not be in

• Coal power stations will increasingly be at
  ports
• Steel related flows a continuing decline
• Building materials trend is to use less
  although a higher proportion may go by rail
• Network Rail maintenance cut by 1/3

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Growth will be in

• - Retail by rail
• - Imports in containers
• - Domestic containers
• But to achieve this, we need
• Terminal and track capacity
• Retail industry must relocate DCs to rail
  connected sites
• City centre stations could take higher value
  goods at certain times
• A 24/7 network

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What happens if demand is constrained?

• We will be short of these trains every day
• West Coast Main Line S End 200
• East Coast Main Line S End 100
• Great Eastern Main Line 80
• Great Western Didcot Reading 85
• WCML Stafford Crewe 220

Delivering Choice for Business
www.rfg.org.uk Tony Berkeley
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2030 Excess of demand over supply (80
utilisation)
Delivering Choice for Business
www.rfg.org.uk Tony Berkeley
52

• So if we cannot run 500 trains a day over 200
  miles average each, and one train is the
  equivalent of 30 trucks,
• 3 million lorry miles a day extra on our roads,
  or
• 45 bn tonnes.km a year
• Or nearly 20 of the total freight moved in 2007
  of 250 bn tonnes.km

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Environmental benefit

• Rail freight vs road freight
• Use Daft chart Fig 2.3 top one only
• Comment on it
• Rail freight market share is 12 of surface
  transport.

Delivering Choice for Business
www.rfg.org.uk Tony Berkeley
54
How to achieve these growth forecasts

• The right Government policy
• An IM proactive and enthusiastic about freight
• A rolling enhancement programme
• Changes to industry processes
• Terminals encourage retail DCs to co-locate

Delivering Choice for Business
www.rfg.org.uk Tony Berkeley
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Co-location

• Saves costs of two road legs between rail
  terminal and DC FM See sep sketch

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Why is the vision thing so difficult in the UK?

• Channel Tunnel 200 years
• Channel Tunnel Rail Link 30 years
• Crossrail 25 to 30 years or double if you
  include Abercrombie
• Thameslink 2000 - 20 years?
• Yet we all love these projects when they are
  complete, and politicians vie with each other to
  cut the ribbon at opening.

Delivering Choice for Business
www.rfg.org.uk Tony Berkeley
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The Swiss do it plentiful terminals (300) and a
policy to support rail freight by charging road
freight for environmental damage

• 300 terminals, wagonload traffic ltmap?gt
• High charges especially trans-Alpine

Delivering Choice for Business
www.rfg.org.uk Tony Berkeley
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Start with smaller enhancements

• Small enhancements such as longer loops, faster
  turnouts, changes to passenger timetables are the
  equivalent to crawler lanes on motorways,
  lay-bys, but very much more difficult to achieve.
  Some have already started, e.g. gauge
  enhancement Southampton to West Midlands.
• They are much quicker to achieve that large
  projects..
• A proactive and enthusiastic IM is needed,
  coupled with a regulatory regime and DfT policy
  that allows it to make such enhancements on a
  rolling basis.

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Key policy challenges and where is our fiscal
stimulus?

• In Nov 2008, Geoff Hoon announced 1bn more for
  roads nothing for rail except some earlier
  delivery of passenger coaches and an enhancement
  to the North London Line after 2012.
• In Jan 2009, Lord Adonis announces development of
  HS2 for completion some time in 2020-30.
• Why did Government not give more immediate rail
  projects?
• French Government plans 4 new TGV lines to be
  complete in 4 years as a fiscal stimulus. We
  plan one in twenty years.
• HS2 will not solve all of the capacity problems
  identified.
• What happens it the network between now and
  completion of HS2?

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Joined up DfT policies No!

• On HS1, designed for freight, the
  government-owned IM proposes to charge six times
  the access charge payable on the classic network
  because government needs the money
• Result 200 trains worth of trucks trundle up
  the adjacent M20 each day and no freight on HS1.
  Why not put a toll on the M20 for trucks?
• Project finance does not work without considering
  user benefits.

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Reconfiguration of national rail network

• For the first time, DfT has produced an
  integrated plan for freight linking air, road,
  rail and water (DaST)
• Not surprisingly, it links centres of supply and
  consumption.
• Not surprisingly, it is little different from a
  passenger network.
• It should also be part of the European
  Commissions Freight Oriented Network proposal,
  based on the TEN-T network.

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Joined up Government policies yes!
Strategic National Corridors DfT DaST Nov 2008
Delivering Choice for Business
www.rfg.org.uk Tony Berkeley
63
Changes to land use and transport planning
policies and processes

• Planning Act 2008 will help, but will it bring
  the lower costs and quicker resolution that is
  necessary?
• What about smaller projects and terminals outwith
  the scope of that Act?
• Getting local planning permissions for terminals
  nearly always gets the NIMBY reaction from
  councils.

Delivering Choice for Business
www.rfg.org.uk Tony Berkeley
64
Financing

• Small enhancements
• Large enhancements
• Terminals rail elements can be expensive
• The 200m in CP4 allocated to freight is very
  welcome.
• It is being well spent, on
• - Southampton-West Midlands gauge
  enhancement.TB to complete
• So can we please have more?

Delivering Choice for Business
www.rfg.org.uk Tony Berkeley
65
Back to the vision!

• For 2015 and 2025, our vision for the rail
  network for freight is for one which
• - Provides a 24/7 railway
• Has adequate network capacity for freight to go
  where and when it needs
• Has delivered adequate terminal capacity
• Has a cost structure enabling it to compete on
  equal terms with road
• Will deliver emissions and other environmental
  savings that will make a significant contribution
  to the UKs obligations.
• Gives a competitive service offering
• Having a market share on surface freight
  transport of 20 to 25 compared with 12 now
  ltMike G pl comment!!gt

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Will the next 20 years be different for the
railways?

• The signs are good
• Network Rail allowed to invest
• Minister announces HS2
• DfT creates Strategic National Corridors
• DfT accepts rail freight forecasts (probably
  would do so for passengers if there were any
  forecasts!)
• Will they then commit to this vision?
• I hope so!

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Tony Berkeley

• Chairman, Rail Freight Group
• 44 7710 431 542
• tony_at_rfg.org.uk