Written evidence submitted by Rail Freight Group
- Rail Freight Group (RFG) is pleased to send evidence to the Transport Committee’s Inquiry into the current coronavirus crisis. No part of this response is confidential.
- Rail freight is playing a vital and critical role in moving goods to support the UK economy and communities in this time of national crisis. This includes moving high volumes of retail products which go directly into food supply chains for supermarkets, support for the power generation sector and continued movements for parts of industry which are still functioning such as steel making. Rail freight has been recognised by Government for the critical role that it is playing at this time.
- However, the rail freight sector is not immune to the impacts of the crisis on business. Unlike the passenger franchises, who have an emergency funding arrangement, freight operators are not in receipt of Government support and are facing severe and profound financial issues as economic activity plunges which could threaten their survival. These same effects are being felt too by end customers and there are consequential impacts on supply chain companies and support services.
Total Trains Run
- Presently the overall level of rail freight movements is significantly reduced. By way of illustration the data shows the overall train count for a typical week in February, and w/c 19 April, mid lockdown. This shows an overall reduction of more than 1/3 of all trains, and severe impacts in the two largest commodity sectors.
- The situation is also volatile with demand changing quickly. For example, there is presently some increase in demand for intermodal as ships from China start to return to port, but forecasts for May show a further drop in requirements. This makes it particularly difficult for operators to plan ahead.
- Network Rail have been working to support the sector and have prioritised rail freight in their operational response whilst passenger services are reduced. They have also allowed a deferment of track access charge payments from 28 days to 56 days and have introduced prompt payment terms for engineering trains which are contracted to freight operators. DfT have offered some support in a temporary revision of the Mode Shift Grant rates to recognise the current poor utilisation rates of intermodal trains. Although this is welcome, the incremental support paid is small and the annual budget (£20m) has not been increased.
- We have asked DfT to consider a more sustained deferment of track access charges, for example with repayment over the remainder of the control period. We have also asked Network Rail to consider a rental holiday for rail freight customers on the freight estate (comparable to that given to retailers at stations) but these have not presently been progressed.
- Unlocking economic activity, wherever it is safe to do so, is fundamental to restoring rail freight volumes and financial stability. Government guidance, for example in the construction sector, is vital to this, and we are pleased to see progress in these areas. The supply chain implications of moves to open up retail and other businesses must be considered and there must be time for businesses to step up in response.
- Over the remainder of 2020 we expect the situation to remain volatile as global and national demand is likely to be supressed. There are particular challenges in maintaining cash flow as activity resumes, as business reserves will have been expended during the lockdown period. It is therefore imperative that Government business support is available throughout the year, at least as far as the final lifting of restrictions, and that measures such as the furlough scheme are tapered out rather than having a sudden stop.
- We are also asking DfT to look at measures to restore business and investor confidence. The ‘Decision to Proceed’ on HS2 was an important example of this, but other areas include releasing planning decisions for infrastructure schemes, many of which are presently held up. We are also asking for track access contracts to be extended out to 10 years to give FOCs confidence to invest in rolling stock and business growth. Many track access contracts expire in the next 3-4 years and there is considerable risk around their renewal with the outcomes of the Williams review not yet clear in this area. In a similar vein, forward confirmation of the MSRS grant budget beyond this year would help give confidence for the intermodal market.
- Finally, it is important that work on post Brexit transition and decarbonisation for rail freight also continues. Both areas are of fundamental important to rail freight, and the sector will need support to respond, particularly if there is a ‘no deal’ exit from the transition period in December.
- We are confident that the rail freight sector can continue to deliver the vitally important services to the UK economy and communities, but ongoing and sustained business support across the year is essential to enable businesses to prosper.
Summary of key asks
- Deferment of track access charges, with repayment over the remainder of CP6
- A rental holiday for tenants on the NR freight estate, comparable with that for retail tenants
- Unlocking economic activity where it is safe to do so, with supporting guidance and time to allow supply chains to function.
- Retaining business support measures across the period of economic recovery, with tapers rather than sudden cessation.
- Confirming planning consents and other infrastructure projects currently delayed in the system.
- Extension of freight track access contracts, and confirmation of forward MSRS rates to support business and investor confidence
- Continue work on decarbonisation for rail freight, including development of electrification schemes, and post Brexit transition