What is freight projection for the next 10 years on UK rails?

[markymark2000]

Some are more profitable, some make losses.

They spend their money on staff, fuel, parts, business development, suppliers (including track access charges), and of course servicing and paying back their debts. Some of which are large.

Surely most of that should be incorporated into contracts and given how large some of the contracts are, making so little profit is a bit strange. To be fair, that said, there are a lot of places where things aren't as fast as they could be (not always the FOCs fault but it still stands) such as having drivers, ground staff and locos sat around between loading and unloading and then some of the long waits in sidings or long paths going out of the way to avoid pinch points.

On some of the points about profit, some investments are short term costs, long term gains so yes it may mess up this years profits but in a few years, it could severely boost them as I say through time savings at bare minimum or at best, through time savings which satisfy a client so much that they then increase the amount of trains so profits are boosted through increased traffic. It's always going to be one of those risks but unfortunately, the established big boy FOCs don't seem to want to take those risks.
I am not saying FOCs should go out and fully fund Felixstowe electrification tomorrow but smaller, cheaper projects, put some money in which would provide significant cost savings to them and they are more likely to be done because of the private sector investment. Less money being spent in one area means more public money can be spent elsewhere. Based on a £3m profit, you can't put too much into infrastructure but every penny counts. On average, how much does it cost for a train (including driver, fuel, general ops costs, maybe waggon costs though they will be variable) per minute or per hour?

 

[zwk500]

Surely most of that should be incorporated into contracts and given how large some of the contracts are, making so little profit is a bit strange.

Rail freight companies are often not in a strong negotiating position for contracts, as they are competing against Road/Water/Air as well as Freightliner or GBRf.

On some of the points about profit, some investments are short term costs, long term gains so yes it may mess up this years profits but in a few years, it could severely boost them as I say through time savings at bare minimum or at best, through time savings which satisfy a client so much that they then increase the amount of trains so profits are boosted through increased traffic. It's always going to be one of those risks but unfortunately, the established big boy FOCs don't seem to want to take those risks.

Perhaps it's a case that the big boy FOCs have teams of people constantly analysing these risks, and working out that the chances are higher for going bust than hitting the jackpot? It'd be a brave (and soon-to-be-unemployed) CFO to authorise spending money on something you've been told won't make a profit.

I am not saying FOCs should go out and fully fund Felixstowe electrification tomorrow but smaller, cheaper projects, put some money in which would provide significant cost savings to them and they are more likely to be done because of the private sector investment. Less money being spent in one area means more public money can be spent elsewhere. Based on a £3m profit, you can't put too much into infrastructure but every penny counts.

Small projects won't make them their money back quickly enough to either pay off the debt incurred to fund the project or generate sufficient revenue to grow the business on the back of the project. Even something as simple as putting in an extra crossover can cost £500,000 pounds. If the calculations above are accurate, that's one sixth of the annual profit of one TOC.

 

[markymark2000]

Rail freight companies are often not in a strong negotiating position for contracts, as they are competing against Road/Water/Air as well as Freightliner or GBRf.

Fair point.

Perhaps it's a case that the big boy FOCs have teams of people constantly analysing these risks, and working out that the chances are higher for going bust than hitting the jackpot? It'd be a brave (and soon-to-be-unemployed) CFO to authorise spending money on something you've been told won't make a profit.

If you weren't going to have any benefit from it, obviously, it would be daft to do. I'd also ask, are these discussions going on behind closed doors about FOCs investing in infrastructure which they would benefit from?

Small projects won't make them their money back quickly enough to either pay off the debt incurred to fund the project or generate sufficient revenue to grow the business on the back of the project. Even something as simple as putting in an extra crossover can cost £500,000 pounds. If the calculations above are accurate, that's one sixth of the annual profit of one TOC.

Hence I said not putting in the full cost. If they put in some money, even 100,000. Network Rail and the government (Westminster or devolved) will be more likely to put money in firstly because a private company is investing but secondly because the amount of money would be lower than without any contribution. IF it's something which a few FOCs would benefit from, it's a bit more money in the pot. If you can save an hour per day, that has to lead to some decent savings and that it without taking into account potential future traffic as a result of the faster journey times which again could increase the funds. Possibly at contract renewal, GBRF I think it is often manage to rinse customers for a lot more traffic. As part of that negotiation, say, if you give us so much extra traffic, we will put in a set of points which speed up the deliveries. It benefits the customer so they may be willing if you negotiate it in. Network Rail and the govt should contribute as well.

Why would a Govt or Network Rail invest in something which benefits a flow which could be gone tomorrow. At least if there is private investment, it's a more secure investment.

 

[Bald Rick]

I'd also ask, are these discussions going on behind closed doors about FOCs investing in infrastructure which they would benefit from?

Yes, and the FOCs do invest. But usually only in things that benefit only themselves.

If they put in some money, even 100,000. Network Rail and the government (Westminster or devolved) will be more likely to put money in

They won’t. 100k makes little difference on a £30m investment, and the FOCs know it.

If you can save an hour per day, that has to lead to some decent savings

Maybe about £200.

 

[markymark2000]

They won’t. 100k makes little difference on a £30m investment, and the FOCs know it.

On a £30m investment yes, it's nothing but I was replying specifically to the £500,000 crossover.

Based off 100k per year, a daily saving of an hour would take under a year and a half to pay itself off. Of course a £500k project paid in full would take significantly longer to pay off so you would want additional traffic which if increased to 2 daily trains, overall a 2 hour saving per day would take 3.5 years to pay off. Still unsustainable but combined with other funding sources, it adds up.

Network Rail might find 250k to go halves on a project but can't find 500k for the full thing. It's so much easier to get someone to give you £1 versus £10 which is easier than £20 and so on. The less that is needed, the easier it is to get funding from others and as it's public money, it has to be spent wisely and to a budget. It's so much easier to find smaller amounts in a budget than larger.

 

[Meerkat]

Does Eddie Stobart have to chip in to get the roads upgraded?

 

[Bald Rick]

On a £30m investment yes, it's nothing but I was replying specifically to the £500,000 crossover.

Sorry, I didn’t spot that. But I can’t remember the last crossover on the main line that cost £500k. You’re looking at 4 times that, and only if there’s no signalling or OLE involved.

== Doublepost prevention - post automatically merged: 15 Jul 2021 ==

Does Eddie Stobart have to chip in to get the roads upgraded?

He did! Very locally though.

 

[Meerkat]

He did! Very locally though.

At the same scale as a company having to pay for a siding to be connected to the network, rather than upgrading a motorway junction presumably?

 

[RT4038]

Does Eddie Stobart have to chip in to get the roads upgraded?

If a customer wanted Eddie Stobart to serve premises that the access wouldn't take that size of truck, then the customer would have to pay for improvement, or contract more smaller trucks (that would be more expensive). That is an investment decision for the customer. This crossover is effectively improving access to the customers premises.

If the FOC thought that the customer would guarantee to increase its business sufficiently to pay the (as quoted by @Bald Rick ) £2m + to install the crossover, and that £2m + couldn't be used better elsewhere.

The hard fact is that investment into a road turning to a customer is rarely needed (apart from new build where it will be factored in as a matter of course), whereas for a railway siding it almost always is. And the railway siding invariably costs much more.

 

[Bald Rick]

At the same scale as a company having to pay for a siding to be connected to the network, rather than upgrading a motorway junction presumably?

Yes.

But then The big drivers of traffic - eg the ports - have paid substantial sums for upgrading the highway network.

 

[markymark2000]

Does Eddie Stobart have to chip in to get the roads upgraded?

How many motorway junction upgrades could take an hour off a journey? We aren't talking 30 seconds time saved here, an hour is a long time. There may be more projects which save more time, I am only going off the 2 locally which I know would save a lot of time.

Sorry, I didn’t spot that. But I can’t remember the last crossover on the main line that cost £500k. You’re looking at 4 times that, and only if there’s no signalling or OLE involved.

== Doublepost prevention - post automatically merged: 15 Jul 2021 ==

I was only going off the numbers given. Would you still be looking at £2m for a lower speed, 15mph crossing on a branch line? How much of the cost quoted is long term planning because of building up plans to keep bidding for funding or whatever to deliver the programme?

 

[RT4038]

At the same scale as a company having to pay for a siding to be connected to the network, rather than upgrading a motorway junction presumably?

The customer would have to pay whatever it cost to connect their premises to the road network - just the same if they wanted to connect with the rail network. The difference is that the railway connection will usually be more expensive, and usually be a nice to have, whereas connection to the road network is fundamental for the business.

 

[richieb1971]

I think the British rail model is needed for freight. Gets rid of the politics and profit problems.

I raised this thread to see where green initiatives were considered for extra paths and new contracts onto rail. What I'm reading is a complete mess of ownership vs benefits vs 2‰ profits. The model is plagued with difficulties.

What a mess.

 

[billio]

No, it's the other way round. Services have been boosted to pretty much the maximum level that can be supported by the network - in critical areas. It means that the easy areas to upgrade don't need it, but anywhere needed to upgrade costs an absolute fortune. Service rationalisation and capacity optimisation helps, but equally a regular hourly timetable often doesn't work very well with freight trains that can be wildly variable in speed, tonnage and traction.

I was thinking about the truth of what you have written. I agree to some extent, but overall is this a chicken and egg situation? Decisions in the past, and it might be some time ago, have resulted in not keeping routes at least free of development, if not keeping the tracks down. Lines have singled to just match a current demand, Chords or sidings have been removed to allow more convenient links between routes.
I remember the Bolton to Rochdale route was identified in the Beeching Report as a route to be developed. Sadly it went, but nowadays it would have been useful as a route from Liverpool to the other side of the Pennines, avoiding the issues associated with passing through central Manchester and saving considerable mileage of some existing freight services..
It seems to me the issue is a lack of strategic thinking, the protection of routes that and the avoidance of potential bottlenecks to assist the development of new service patterns.

 

[Bald Rick]

I think the British rail model is needed for freight. Gets rid of the politics and profit problems.

In later BR days freight was all about profit, and nothing else.

 

[RT4038]

I think the British rail model is needed for freight. Gets rid of the politics and profit problems.

I raised this thread to see where green initiatives were considered for extra paths and new contracts onto rail. What I'm reading is a complete mess of ownership vs benefits vs 2‰ profits. The model is plagued with difficulties.

What a mess.

How much expansion of Rail freight was there in the British Railways period 1948 - 1993? If the British Rail model was so good I would expect by 1993 to see perhaps a 25% increase in traffic over 1948. Maybe not so good then?

 

[richieb1971]

How much expansion of Rail freight was there in the British Railways period 1948 - 1993? If the British Rail model was so good I would expect by 1993 to see perhaps a 25% increase in traffic over 1948. Maybe not so good then?

From an operations point of view you had one supplier. You had 600 locos nearby which could be utilized. You had more rail then you do now.

The only thing that went up in private hands is efficiency.

If BR was around today the government would be in control of what gets built and determine the outcomes by force to push their green and rail freight agenda. In private hands it just has too many variables and opinions and a 2 percent profit margin.
I cannot believe railfreight is squeezed that hard.

 

[coppercapped]

From an operations point of view you had one supplier. You had 600 locos nearby which could be utilized. You had more rail then you do now.

The only thing that went up in private hands is efficiency.

Inefficiency Rules...!

If BR was around today the government would be in control of what gets built

Remind me...which organisation controls Network Rail's financing...?

and determine the outcomes by force to push their green and rail freight agenda. In private hands it just has too many variables and opinions and a 2 percent profit margin.I cannot believe railfreight is squeezed that hard.

You must find it amazing that the private sector manages to run shirt and trouser manufacturing and distribution and the supermarkets manage to run their businesses without any central control. How is that possible?

 

[richieb1971]

Inefficiency Rules...!

Remind me...which organisation controls Network Rail's financing...?

You must find it amazing that the private sector manages to run shirt and trouser manufacturing and distribution and the supermarkets manage to run their businesses without any central control. How is that possible?

So we are in the best place that we are now in then? You can make more than 2% profit by putting a lot less work into your life.

you can't move left, right, up or down. You can only accept the status quo.

 

[Irascible]

The advantage of govt interference ( either through control or subsidy ) is that the profit can be made elsewhere in the economy - but that is the sort of socialist policy we've struggled with since the 80s; why we consider it fine for passengers and not freight I'm not sure.

Govts are not inheremtly incapable or more capable ( although in this country not usually the most attractive employer ), they can look at a bigger picture and take a broader view of costs though.

 

[Meerkat]

The advantage of govt interference ( either through control or subsidy ) is that the profit can be made elsewhere in the economy - but that is the sort of socialist policy we've struggled with since the 80s; why we consider it fine for passengers and not freight I'm not sure.

Can you explain that theory please?

 

[zwk500]

Can you explain that theory please?

Investment in railfreight creates jobs and facilitates growth in the industries served that create greater taxation revenue for the treasury than the subsidy required to run the trains.

 

[Dr Hoo]

Investment in railfreight creates jobs and facilitates growth in the industries served that create greater taxation revenue for the treasury than the subsidy required to run the trains.

Whilst there may be cases where those are the outcomes it doesn't always seem to be the case.

For example, extending a loop may allow 'fewer-longer-heavier trains'. There may well be marginal network capacity benefits from this (but not necessarily if it simply means that an SX train now runs on MWFO). There will actually be fewer train driving jobs needed.

A flow 'won from road' (not that that actually happens very often) might employ an extra train driver but at the same time eliminate dozens of lorry driving jobs. There may be environmental and congestion benefits but the growth and tax-take advantages are probably pretty modest. Mode Shift Revenue Support (MSRS) covers this sort of thing but there seems to be relatively little interest in extending this. MSRS generally goes to the customer where rail (or waterway) would otherwise be more expensive than road but still relies on the competing FOCs to bid for the flow on typically wafer-thin profit margins.

 

[zwk500]

Whilst there may be cases where those are the outcomes it doesn't always seem to be the case.

For example, extending a loop may allow 'fewer-longer-heavier trains'. There may well be marginal network capacity benefits from this (but not necessarily if it simply means that an SX train now runs on MWFO). There will actually be fewer train driving jobs needed.

A flow 'won from road' (not that that actually happens very often) might employ an extra train driver but at the same time eliminate dozens of lorry driving jobs. There may be environmental and congestion benefits but the growth and tax-take advantages are probably pretty modest. Mode Shift Revenue Support (MSRS) covers this sort of thing but there seems to be relatively little interest in extending this. MSRS generally goes to the customer where rail (or waterway) would otherwise be more expensive than road but still relies on the competing FOCs to bid for the flow on typically wafer-thin profit margins.

I said theory. As ever with theory it doesn't always translate neatly to real life. And the theory would never be applicable to all railfreight investment.

 

[Meerkat]

Investment in railfreight creates jobs and facilitates growth in the industries served that create greater taxation revenue for the treasury than the subsidy required to run the trains.

That’s a big reach, and if it were true the government would be a lot keener on greater funding via the processes that already exist

 

[zwk500]

That’s a big reach, and if it were true the government would be a lot keener on greater funding via the processes that already exist

See above post.

 

[Meerkat]

See above post.

i thought you were supporting nationalisation of freight, but maybe you were making a more general point?

 

[The Planner]

Whilst there may be cases where those are the outcomes it doesn't always seem to be the case.

For example, extending a loop may allow 'fewer-longer-heavier trains'. There may well be marginal network capacity benefits from this (but not necessarily if it simply means that an SX train now runs on MWFO). There will actually be fewer train driving jobs needed.

A flow 'won from road' (not that that actually happens very often) might employ an extra train driver but at the same time eliminate dozens of lorry driving jobs. There may be environmental and congestion benefits but the growth and tax-take advantages are probably pretty modest. Mode Shift Revenue Support (MSRS) covers this sort of thing but there seems to be relatively little interest in extending this. MSRS generally goes to the customer where rail (or waterway) would otherwise be more expensive than road but still relies on the competing FOCs to bid for the flow on typically wafer-thin profit margins.

Not sure the extended loop scenario is like that, it is more that you can run longer trains in all the SX paths. The profit starts coming with that extra length.

 

[zwk500]

i thought you were supporting nationalisation of freight, but maybe you were making a more general point?

I was explaining the theory behind government support of freight. I do not know enough of the economics to say whether any 1 model is better than any other.

 

[Dr Hoo]

Not sure the extended loop scenario is like that, it is more that you can run longer trains in all the SX paths. The profit starts coming with that extra length.

It obviously depends on the nature of the flow. For something like containers from a port extra train length might well allow the conveyance of additional traffic that is already passing by another mode. On the other hand a quarry > city flow of (say) 10,000 tonnes per week may not be very expandable because of production or demand limitations.

A particular feature with anything close to a 'hook and haul' situation is that any 'excess' profit provides an opportunity for a competitor FOC to undercut. Typically the customer will ask the incumbent, "well, you're now moving our traffic in fewer trains (that it is more awkward for us to load) so you must be saving some money; how much are you prepared to reduce the rate?"

The old days where BR was in a position to price well over cost on some flows like short-distance merry-go-round coal are long gone.