1. INTRODUCTION
This paper outlines the Railway Industry Association’s (RIA) key messages which will be conveyed in its submission to the Industrial Strategy consultation. The paper is informed by the views of the Association’s members.
2. ABOUT THE RAILWAY INDUSTRY ASSOCIATION
2.1. RIA is a national trade body, which champions a dynamic UK rail supply sector. Our mission is to help grow a sustainable, and high-performing railway as well as promoting UK rail expertise and products to international markets. Rail is a foundation sector for the UK’s economy which supports sustainable investment and jobs in communities across the UK. RIA has over 400 companies in membership, and is active across the whole of railway supply, covering a diverse range of products and services and including both multi-national companies and SMEs (60% by number). www.riagb.org.uk
3. KEY MESSAGES
3.1. We are responding to the 35 specific questions in the consultation document. However, we have five key messages about the role of rail in supporting the industrial strategy:
1. Transport infrastructure is an essential enabler of the whole industrial strategy, because it connects priority industries with skilled workers, and products with markets.
2. The rail industry also incorporates four of the priority sectors identified in the industrial strategy, with strong supply chain capability in each of the following:
a. Advanced Manufacturing
b. Digital and Technologies
c. Professional and Business Services
d. Clean Energy Industries
3. The rail industry can support significant opportunities for growth in all these priority areas, both in the UK market, and exports. However, a number of key barriers need to be addressed to see progress here, particularly around procurement and pipeline visibility, and enabling the use of private funding and finance.
4. Rail investment already provides higher returns to economic and social objectives. These benefits are particularly delivered through the supply chain (which is a diverse mixture of multinationals, larger companies, and SMEs, all with many specialist skills). For example, labour productivity in the rail supply sector is 29% higher than the UK average and for every 1,000 people employed in the rail network, a further 4,300 jobs are supported across the economy.
5. There is a significant opportunity for the Government’s Industrial Strategy to further enhance the contribution of rail to wider social objectives. It needs to think further than solely best value for money and take into account the wider social and economic benefits generated from projects and long-term impacts.
3.2. Crucially, the rail sector offers the Government a relatively quick way to deliver on Industrial Strategy objectives. A very important overarching theme is that in the rail sector, a very large (and increasing) proportion of activity is procured directly by the public sector, meaning that there is a significant opportunity for Government to use its purchasing power and budgetary resources to directly change the way that priority sectors (e.g. advanced manufacturing) are supported and encouraged to grow, compared to other industries. These direct levers to influence industrial activity are a particular advantage the rail industry offers for Government to effect changes quickly to implement the industrial strategy. There is now the chance through procurement reform for changes in the procurement strategies in rail to make radical changes to investment through the supply chain. In particular, the reforms must enable procurements to support long-term, large scale strategic programmes (rather than piecemeal planning) that will stimulate the market (from large down to small suppliers) to respond with innovation, recruitment, training programmes and efficiencies. For example, modern methods of construction can be enabled quickly, but only if we can plan and procure at scale, and for the long term.
4. KEY MESSAGE 1: Transport infrastructure is an essential enabler of Industrial Strategy, because it connects priority industries with skilled workers, and products with markets.
4.1. Good transport is a foundational enabler of business development. RIA asks that the Industrial Strategy is underpinned by a geographic mapping that identifies key transport links between the hubs/’clusters’ where priority sectors are located (e.g. advanced manufacturing). It should then be used to test the resilience of those connections in terms of both future capacity and asset condition/reliability. This needs to feed into the Government’s Infrastructure Strategy, so the vision is complementary.
4.2. Rail and light rail have a unique ability to transport large numbers of people to city centres rapidly. Rail connections can close the productivity gap between London and the UK’s other core cities. The geographic mapping needs to identify and plan for the role of city regions in supporting productivity.
i) The National Infrastructure Commission (NIC) has stated that failure to address rail capacity to city centres could hold back productivity improvements. Its analysis identifies four cities with high projected population and economic growth: Birmingham, Manchester, Leeds and Bristol 1. Investment in public transport capacity is vital to unlocking this growth and maximising productivity.
ii) As well as conventional rail, light rail also needs to be considered as part of the infrastructure supporting regional growth. It has historically played an important role in London, and there are many opportunities in other nations and regions around the UK. For example, there is currently a consultation on the Leeds line, which will help move people within Leeds as well as in and out of the city.
4.3. Rail use (freight and passenger) will need to grow if the Industrial Strategy is going to be delivered alongside falling CO2 emissions.
1 https://nic.org.uk/app/uploads/Final-NIA-2-Full- Document.pdf
i) Transport is the largest contributor to UK emissions, but rail is the cleanest mode of mass transportation, contributing to just 1.4% of transport emissions and accounting for less than 1% of all UK emissions 2 .
ii) The Government's target to grow rail freight by 75% will significantly help the country reach its net zero goal – a single freight train removes up to 129 lorries from the roads 3 .
iii) Passenger demand – according to the RIA-commissioned Steer Report in February 2024 – is set to grow between 37% and 97% by 2050, depending on Government policies, meaning that we need to invest now to accommodate for this future growth and capacity 4
5. KEY MESSAGE 2: The rail industry embodies several of the priority sectors identified in the Industrial Strategy.
5.1. Rail has a very strong connection with four of the eight priority areas identified. Representatives from the sector will therefore need to be involved in developing and delivering the Industrial Strategy.
5.2. Advanced Manufacturing
i) The rolling stock industry employs over 30,000 people and contributes more than £1.8bn GVA annually 5 . It is a high-productivity industry, where the average employee generated almost £105,000 GVA in 2019, compared to an average of £65,000 GVA per worker in the manufacturing sector in 2018.
ii) The UK has four significant rolling stock manufacturing locations across the UK, which are capable of supplying the UK’s average annual heavy rail requirement of 430 vehicles per year 6 as well as scaling up to supply international markets.
iii) Modern methods of construction are an important feature of the rail industry. For example, the Centre of Excellence for Modern Construction (CEMC) in Nottinghamshire is one of Europe’s most advanced concrete products manufacturing facilities, supporting major transport infrastructure projects. 7
5.2 Digital and technologies
i) The rail sector uses and develops many digital components, with substantial and ongoing investments in areas spanning signalling, remote asset monitoring, artificial intelligence, virtual reality, cyber security and data analysis.
5.3 Professional and business services
i) The UK is globally recognised for its engineering and construction advisory and design services – these are highly competitive skills in a global market. In part, this reflects the UK’s industrial heritage, having designed and exported the railway to the rest of the world. However, there is now a risk of skills shortages for UK projects.
2 https://riagb.org.uk/RIA/Who_we_are/16-Key-Asks/Decarbonisation.aspx
3 https://riagb.org.uk/RIA/Who_we_are/16-Key-Asks/Decarbonisation.aspx
4 https://steergroup.com/insights/news/growth-projections-britains-passenger-rail-services
5https://www.riagb.org.uk/RIA/RIA/Newsroom/Publications%20Folder/The%20UK%20Rollin g%20Stock%20Industry.aspx
6https://riagb.org.uk/RIA/Newsroom/Publications%20Folder/A_lower_cost__higher_performin g_net-zero_railway
7 https://www.laingorourke.com/company/about- us/modern-methods-of- construction/
ii) Engineers are highly skilled and contribute towards a significant proportion of the UK workforce. For example, members of the Association for Consultancy and Engineering (ACE) employ over 60,000 people in the UK, and 250,000 worldwide 8
5.4 Clean energy
i) The UK rail industry has the potential to become a world leader in battery technology, supporting the whole UK battery sector. Rail is currently one of the largest energy users in the UK, and decarbonising rail will require a major increase in the adoption of battery technology on trains and along railway lines (roughly 34% of the network is appropriate for battery technology 9). This technology is gaining efficiency every year and has strong potential to be exported elsewhere in the world. The UK has both large and small businesses with deep technical and commercial expertise in applying this technology.
ii) The move to deploy battery and other low-carbon technologies within the UK rail network will provide universities and startups with clear opportunities to develop and implement innovative green technology.
iii) The predictable nature of demand for energy for rail creates innovative opportunities for clean energy generation and storage – thus an innovative environment.
iv) East West Rail is an example of green traction power in the form of discontinuous electrification and hybrid battery-electric trains 10
6. KEY MESSAGE 3: The rail industry can support significant opportunities for growth in all the priority areas, both in the UK market, and exports. However, a number of key barriers need to be addressed.
6.1. The UK needs a stable supply chain for its own railway, but securing this capability within the UK will also provide an opportunity to export to the global market.
6.2. The rail world market is growing and UK expertise is highly desirable internationally, due to it being the home of the railway. The World Rail Market Study shows that the global rail supply market grew (in real terms) by 2.7% between 2019-2021 and 2021-2023. During the latter period, the global market had an average annual volume of EUR 201.8bn and is expected to continue growing at approximately 3%. 11
6.3. A key barrier for UK rail suppliers is the lack of a visible pipeline of work. A steady and visible pipeline of work provides businesses with certainty, and it enables them to plan and invest with confidence. It also helps prevent the loss of skilled jobs and maintains the future capability of the supply chain.
8 https://www.acenet.co.uk/about-us/
9 In April 2024, RIA published a report entitled ‘A lower cost, higher performing net-zero railway’ which outlined how the railway can be decarbonised by 2050. Currently over one-third of the network is already electrified (38%) and one-third can be decarbonised via the adoption of battery trains (34%). The remaining third will need to be electrified by 2050, but half of that (13%) is already in Government plans, therefore only an additional 15% of the network needs to be electrified.
10 https://eastwestrail.co.uk/news/latest-stories/our-consultation-is- now-open
11 https://www.unife.org/wpcontent/uploads/2024/07/Abstract_UNIFE_World_Rail_Market_Study.pdf
6.4. Another barrier is complex and resource-intensive procurement processes. For example, companies can spend millions on bids which are unsuccessful and then need to recoup those costs. Best practices need to be followed, such as early supplier engagement, publishing indicative volumes, and including commitments in framework procurements. There needs to be a pro ‘buy UK’ mentality within procurement. We need to procure at a sufficient scale (portfolio/programme) to secure efficiencies.
6.5. More widely, procurement reform offers a huge opportunity to leverage the purchasing power of the public sector in rail and enable long-term strategic rolling-programmes of investment in priority sectors. The fact that the public sector controls nearly all of the procurements within rail means that Government holds the levers to enact significant reform relatively quickly, should it wish.
6.6. Adoption of new technology is also a key barrier. The UK has the skills, capabilities and technology to advance the rail industry, and export globally, yet there is significant difficulty in implementing it, compared to European counterparts. The inability to create an innovation-friendly environment stifles private investment and initiative, preventing the UK from recruiting and maintaining the best talent. Failure to reform this, which requires changing the culture and behaviour of rail clients, as well as national procurement policy, will impact the country’s ability to create and maintain a railway for future generations.
6.7. Finally, several barriers exist to leveraging private investment (both finance and funding) in rail, which need to be addressed through a clear Government policy and playbook. RIA has written reports on what steps are needed. 12
7. KEY MESSAGE 4: Rail investment already provides higher returns to economic and social objectives. These benefits are particularly delivered through the supply chain (which is a diverse mixture of multinationals, larger companies, and SMEs, many with specialist skills).
7.1. At the time of writing in November 2024, the latest economic data, commissioned jointly by RIA and the Department for Business & Trade, showed that in 2023 the UK rail sector generated £41.2bn GVA and supported 640,000 UK jobs through the economy. The total number of jobs supported was greater than the total employed workforce across the Birmingham local authority area. Rail investment also generates wider employment and skilled jobs.
i) For every 1,000 people employed in the rail network, a further 4,300 were supported across the UK economy (a 4:1 ratio). 13
ii) New projects in rail create job opportunities for the economically inactive. For example, 10% of the HS2 workforce was previously considered economically inactive 14 .
iii) The National Skills Academy for Rail (NSAR) has evidence showing that £1 spent on training on rail skills in the UK results in a £3 return on investment 15 .
12
https://www.riagb.org.uk/RIA/RIA/Newsroom/Publications%20Folder/Private_Investment.as px and https://riagb.org.uk/RIA/Rail-Insights/RIA- Manifesto-2024/Leverage-privateinvestment.aspx
13 Oxford Economics (2024) “Value of Rail”
14 NSAR, 2024
15 https://www.nsar.co.uk/2024/02/how-to-increase-apprenticeship-numbers-in-theindustry/#:~:text=Rail%20now%20needs%20about%205%2C000,doubling%20of%20current%20
iv) Labour productivity (GVA per job) across the rail supply sector was 29% higher than the UK average. Additionally, productivity across all rail-related work was 12% higher than the average 16 .
7.2. Research carried out by WPI Economics on behalf of the Rail Delivery Group found that the rail industry itself generated £26bn in economic, environmental and social benefits over the past year, with rail customers contributing £98bn through spending with local communities. The report predicts that an additional £20bn could be added to the UK economy with just a 40% growth in rail passengers 17 . However, this increase in passenger numbers can only be achieved through consistent support for the rail sector.
7.3. The location of roles is geographically diverse and provides jobs in lower-economic areas:
i) Rolling stock manufacturing ‘clusters’ are distributed throughout the UK, often in lower economic areas. The main hubs are located in Derby, Newton Aycliffe, Goole and Newport, providing significant employment opportunities in the local area and supporting the regional economy.
ii) An economic impact assessment report in 2023 on Transport for London’s (TfL) supply chain shows that two-thirds of their suppliers are based outside of London, with large numbers in the North West and West Midlands 18 . Additionally, TfL’s supply chain supports 29,000 jobs outside of London, including 8,870 in the North West and 5,160 in the North East. This demonstrates that the effects of investment in London can be seen throughout the country, due to the wide distribution and location of suppliers.
8. KEY MESSAGE 5: There is an opportunity for the Government’s Industrial Strategy to further enhance the contribution of rail to wider social objectives. It needs to think further than solely best value for money, and take into account the wider social and economic benefits generated from projects and long-term impacts.
8.1. Government procurement practices can maximise the value that the UK gets from expenditure in rail, by taking advantage of the ability to specify social value in the procurement criteria, for example, to maximise the creation of skilled jobs in areas of deprivation. As an example, Chiltern Railways was able to generate £1.3bn of social value in 2023, via their Station Adoption Groups, Community Rail Partnerships and Community Investment Fund 19
8.2. The movement towards ‘Most Advantageous Tender’ via the Procurement Act 2023 is a welcome recognition by the Government that wider value can be driven through public procurement. RIA argues that this change in approach and culture should be embedded at all levels, so that suppliers are not penalised for higher bid costs due to higher requirements on sustainability and social value. This will be central to unlocking the full wider benefits of rail investment.
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16 Oxford Economics (2024) “Value of Rail Report”
17 https://www.raildeliverygroup.com/about-us/publications/13048 -value-of-railreport/file.html
18 https://content.tfl.gov.uk/tfl-supply-chain- economic-impact-assessment-22-23.pdf
19 https://press.chilternrailways.co.uk/news/chiltern-railways-grow-social-valuecontributions-to-gbp-1-3-billion-in-2023
Foranyfurtherinformationaboutthispaper,pleasecontactRIAPolicyDirector RobertCook,atrobert.cook@riagb.org.ukandon02072010777