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Column - May 2016
 

Suppressed demand for rail freight consumer and construction services

Rail freight is worth £1.6 billion per year to the UK economy and each year it carries goods worth over £30 billion ranging from high end whiskies, and luxury cars to supermarket products, cement and construction materials. And importantly, it also has huge potential to expand these markets to deliver more freight in a safer low-carbon way while reducing road congestion and improving productivity. 

However, there is considerable suppressed demand for rail because of the current limitations of the rail network. That is why the current funded network upgrades to the Strategic Rail Freight Network due to be completed by 2019, are so important.Crucially these upgrades demonstrate that the Government is committed to rail freight so that the industry, which has invested £2.5 billion in the past 20 years, has the confidence to carry on supporting the sector.

Why, because upgrades are needed to allow more efficient reliable rail freight serviceswith longer heavier trains and diversionary routes. The current funded Network Rail Control Period 5 freight upgrades, as highlighted in the Hendy Review, demonstrate high value for money; hence why the completion of train lengthening out of the port of Southamptonis important to allow longer more efficient trains and offer diversionary rail freight routes to the West Midlands. Previous enhancements have shown that targeted rail freight upgrades work. The gauge enhancements out of Southampton port resulted in rail freight market share increasing from 29 to 36 per cent1 within a year of completion of the project.

Felixstowe, the UK’s largest container port, currently has 32 rail freight services out of the port each day but further growth of rail services is constrained by the lack of capacity; every additional path which becomes available can be used.  That is why the branch line upgrades including two loops, between Felixstowe and Ipswich, which are part of the current Network Rail enhancement programme, are so important because it will allow another ten paths each day of out the port.

The industry is also making the case for further enhancing the capacity from Felixstowe to the North in the next Network Rail period 6 in the early 2020s, which is key, if rail freight is to realise its full potential on this corridor. 50 daily trains could operate in and out of the port each day resulting in the removal of 40 million long distance lorry miles from the A14 corridor per annum with rail’s market share increasing to around 40% with these further works. The A14 corridor, which parallels the Felixstowe to the North corridor, has significant long distance HGV traffic which could be carried by rail.Department for Transport figures state that a modest decrease in traffic generally of around 2%, results in congestion falling by 10%. These figures do not even take into account the fact that HGVs occupy considerably more road space than cars (have a passenger car unit pcu value of 2.5),also need longer braking distances and slower to manoeuvre and therefore cause more road congestion  than other vehicles

Construction traffic grew ten per cent last year and is forecast to grow 2.5 per cent per year; in order for this traffic to keep expanding,more quarries need to be rail connected and also the network needs to be capable of carrying longer heavier trains to make services more cost efficient. So the current Buxton train lengthening funded upgrade is important.

Liverpool port has seen massive regeneration by Peel Ports with a new rail freight and biomass handling terminal so the Bootle line upgrades, under way are part of the re-development of Liverpool docks.

It is excellent that the Government has retained rail freight grants for a further four years;Grants represent excellent value for money to the UK taxpayer and are only paid for actual HGVs removed from our roads.The grants are delivering an average benefit: cost ratio of over 5:1 and has been incredibly effective at moving freight from to road to rail (container volumes have doubled). These grants are paid in recognition of the socio-economic benefit of removing trucks from roads and as a means of compensating rail for theroad/rail freight market distortion. Rail has to compete with HGVs which have far higher external costs than rail freight but only pay around 30% of the costs they impose on society and the economy.

It is also welcome that the Department for Transport is writing a rail freight strategy with industry involvement which integrates with the Department’s review to reduce freight’s carbon emissions.Key outputs include the following :-

  • Updated rail/road carbon and air quality emissions
  • Better integration on rail freight policies between both units within DfT and working with other departments
  • Developing options for strategic freight capacity
  • Modal shift opportunities
  • Integrating timetabling for freight paths with passenger services.
  • Highlighting to a range of audiences what rail freight already does for UK PLC
  • Giving confidence to rail freight industry about getting HS2 released capacity
  • Market growth and updated market forecasts
  • Developing sustainable charging and support for rail freight.

The Department for Transport recognises promoting modal shift through the rail freight strategy, is central to itsobjective to reduce freight emissions in its Freight Carbon Review. Given that HGVs produce 20 per cent of transport’s CO2 land transport emissions2 while only accounting for 5 per cent of vehicles it shows that transferring more freight to rail can significantly reduce freight’s carbon emissions; rail freight produces 87% less carbon dioxide emissions than HGVs for the equivalent journey. 
 

1. Financial analysis  £70.7 million project having a Net Present value of £376m

2. Road and rail ie surface access


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