Rail's Path to Success
Adapting today for a better future
Rail managed to adjust its ways of working during the pandemic, and then had to change again when pandemic restrictions were eased. Now, months after pandemic restrictions have ended, a consistent pattern of the ‘new normal’ is becoming clearer, and, once again, rail needs to adapt.
Pre-pandemic passenger numbers for rail were high, especially for business and commuter journeys. In fact, they’d been increasing consistently since the 1990s, a noteworthy achievement which industry should feel proud of. Now, in the post-pandemic era, total passenger journeys are 90% of what they were immediately before the pandemic, and rail revenue is 87% of what it was. That sounds fairly good. Maybe not as good as we’d like, but still impressive.
Unfortunately, the inflation-adjusted figure is probably nearer 75%, which isn’t so good. And while leisure travel is up, the important business and commuter markets are much reduced. Realistically, with the shift to working from home, this pattern looks like the ‘new normal’. In addition, rail freight has increased, but given the cost-of-living crisis and reduced consumer demand, absolute volumes of freight are currently low. Again, that’s a bit good but not as good as we need for rail revenues.
So what can rail do with this new normal? There are two ways forward. One is to adjust to, and exploit, the changing pattern of usage among passengers and increase the focus on leisure passengers. Claire Mann, MD of South Western Railway, touches on the need to be innovative and offer flexibility to encourage customers to return to the railway in her interview with us in section four. We also explore whether there are insights from retail that we can apply to the leisure passenger market in section 11.
The second is to increase the volumes of freight. Happily, this also aligns with other pressing agendas including reducing fuel costs, HGV workforce shortages, and the net-zero agenda.
Research by the Rail Freight Group shows that compared to HGVs, rail freight is far more fuel efficient, with one freight train being able to replace 75 HGVs. It is not surprising therefore that in 2021 Tesco increased its usage of rail freight and planned to make further increases. Some former customers including Royal Mail are also returning, another testament to the commercial advantages of using rail freight right now.
Additionally, rail freight has the advantage that HGV doesn’t, in that freight customers don’t need to wait for more drivers to be trained. Rail freight is ready now. Although freight volumes are currently down due to reduced customer demand, research shows that business trends created in a depression tend to thrive when the economy improves. As a result, businesses succeeding in an environment with strong headwinds identify how best to operate in that environment overall. Consequently, rail freight needs to focus on its relative share of market size now so it can be positioned for growth when demand increases.
Interestingly, although rail freight is delivered by private companies without public subsidy, there are signs that the government is making moves to support it. For instance, the Great British Railways Transition Team is considering including a growth target for freight. This would really help rail freight and consolidate and increase the model shift.
Each of these three factors—fuel efficiency, HGV challenges, and a potential growth—also support the decarbonisation of transport and showcase rail’s important role in this process. Research by the Rail Fright Group shows rail freight can reduce CO2 emissions by up to 76% compared to road, so it has a very important role to play in decarbonisation.
Although there are challenges for rail freight at present, here at RSSB we know it’s vital to future success, for rail and the whole GB economy. Since 2020, we have increased engagement with freight via industry groups, webinars, meetings, and surveys to create a pipeline of research, shaped by freight requirements.
See how our Freight Research Programme is helping the freight sector optimise its operations.
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