Written evidence submitted by the Rail Delivery Group (FCR0005)
The purpose of the Rail Delivery Group (RDG) is to enable Network Rail and passenger and freight operating companies to succeed by delivering better services for their customers. This ultimately benefits taxpayers and the economy. Our work is focused on four transformational portfolios to: enable improvements in today’s railway, transform customer experience, inform industry reform to enable excellence, and plan for tomorrow’s railway. This activity is supported by communications and engagement with stakeholders, and improvements in how RDG is organised and operates. As a representative body for the whole industry we provide a voice for both passenger train and freight train operators. We also provide important ticketing, information and reservation services for passengers on behalf of our members’ companies.
Rail plays an ever more crucial role in Britain, with long-term growth in passengers and freight. The industry employs approximately 92,000 people directly and a further 124,000 are employed in the supply chain. Research undertaken by Oxera, on behalf of RDG in 2015 found that the industry contributed £10.1bn gross value added to the economy each year and paid £4bn to the Exchequer.
Rail is significantly impacted by both vertical and horizontal legislation and policies from the European Union (EU). In addition, the rail industry trades directly with the EU. The key freight and passenger operators and infrastructure managers in Great Britain (GB) either have overseas ownership, or are British firms that trade outside the UK, or have aspirations to do this as rail markets open. In addition, Eurostar provides an international-only passenger service (10.4 million passengers per year) and freight operators also run international services through the Channel Tunnel.
Type | Owning Group | Ownership | Overseas rail operations if British |
|---|---|---|---|
Passenger operators | FirstGroup Plc | British |
|
Keolis SA | French |
| |
Go Ahead | British | Germany | |
National Express | British | Germany | |
Trenitalia | Italian |
| |
Deutsche Bahn AG | German |
| |
MTR corporation | Hong Kong |
| |
Abellio | Dutch |
| |
Mitsui | Japanese |
| |
Serco Group | British |
| |
Stagecoach Group | British |
| |
Virgin Group | British |
| |
Eurostar Intl Ltd | French 55% Canadian 30% British 10% Belgian 5% | Eurostar is a UK-headquartered operator currently running in the UK, France, Belgium and soon in the Netherlands. | |
Infrastructure managers | Network Rail | British |
|
High Speed 1 | Canadian |
| |
Freight operators | Freightliner Group | American | Operations across the EU |
DRS | British |
| |
DB Cargo | German | Operations across the EU | |
Colas | French | Operations across the EU | |
GBRailfreight | Swedish | Operations across the EU |
A transitional deal may be one which takes the UK from EU membership to an already agreed relationship or one which fills a gap whilst the end-state is still being negotiated. This paper looks at both unless explicitly stated.
Whilst the Prime Minister’s speech on 17 January gave some clarity as to the Government’s aspirations for a deal with the EU, the shape of future arrangements will only become clear after extensive negotiation and, as such, the industry is uncertain what the future relationship between the UK and EU will look like. As such it is challenging to articulate in any great detail what a transitional arrangement should consist of for the rail sector. However, RDG has identified seven principles across all of its Brexit analysis and applied them to the Committee’s question about the reasons why a transitional arrangement is necessary and how any arrangement should be designed.
RDG’s response works on the assumption that any transitional arrangement should be designed with three key interlocking strands. A transitional deal cannot be designed in a two-dimensional format only focusing on the new relationship with the EU; this is only the first strand. The second is a correlating domestic plan of policy review and consultation with industry to give legal and business planning certainty whilst making the transition. The third is a plan to backfill any policy lacunas or economic shortfalls and exploit new opportunities.
This response does not explore what these potential opportunities may be as they are unlikely to exist during a transitional period. On behalf of its members RDG is undertaking work to identify potential opportunities in the short, medium and long term and feeding these into the UK Government.
Finally, RDG’s remit covers Great Britain only, and therefore issues pertaining to Northern Ireland are not covered in this response.
The British rail network is among the safest in Europe; legislative or regulatory changes as a result of the UK exiting the EU should not compromise safety.
The Great Repeal Bill (the Bill) will play a critical role in ensuring that there is no scramble to redesign safety legislation and regulation which is currently contained in the EU framework. The Bill is also critical for ensuring there is no unexpected legislative lacuna on ‘day-one’ of leaving the EU.
The European Union Agency for Railways (The Agency) has been established to provide EU Member States and the Commission with technical assistance in the fields of railway safety and interoperability. The Agency also undertakes work into common approaches to questions concerning railway safety. As part of any transitional arrangement, and whilst any EU safety measures are still in place under the Great Repeal Bill, the rail industry would ask that membership of the Agency by the UK is retained. In the meantime the UK Government may seek to put in place a domestic alternative if Agency membership is not included in the final deal.
In the short term any currently applicable legislation should not be disapplied by stealth. Any departure from current jurisprudence should be as a result of a clear change in government policy in consultation with stakeholders. It is crucial to retain legal certainty.
The Great Repeal Bill will give legal certainty to the rail industry and is therefore welcomed. A transitional arrangement would also be welcomed, as it would ensure a status quo until there are considered and consulted domestic policy decisions. This reduces the risk of disapplication by stealth.
The industry needs to retain the ability to access a skilled workforce, in particular in areas where there are currently skills shortages.
It is estimated that 8% of direct employees in the rail industry are non-UK citizens in a range of jobs, but crucially many roles requiring specific skills where labour can be scarce. This percentage is significantly higher for international operators such as Eurostar. It is essential that any transitional arrangement takes into account the lead-time to recruit and train new staff if there is more restricted labour movement between the UK and EU. In addition, any currently employed labour should have the right to remain working in the UK in these roles.
As part of the domestic plan accompanying any transitional arrangement there needs to be provision to support industry with creating a pipeline of an appropriately trained workforce.
Freight and passenger operators who currently run international services need to retain the ability to access non-UK infrastructure without undue delay, cost or operational boundaries. Marginal economics in cross-border business mean that members might find it impossible to economically run a service if hindered by significantly divergent operating regimes or by lack of mutual recognition of licenses and certificates.
International freight and passenger services must be protected by a transitional arrangement so that they can continue to run. Three examples of not having a transitional arrangement are given below.
Mutual recognition of operating licenses (The Railway (Licensing of Railway Undertakings) Regulations 2005, implementing 2004/49/EC)
Without mutual recognition of operating licenses, Eurostar services for example, would no longer have the automatic right to pass into France and Belgium. An international operator, particularly if it were crossing into more than one additional EU Member State, may seek to have its licence issued by an EU Member State rather than the UK. In this instance it is very possible that this Member State to requires that core functions of the business be transferred to this Member State. This has a potential risk for international operators currently headquartered in the UK.
Mutual recognition of train driver licenses (The Train Driving Licences and Certificates Regulations 2010 implementing Directive 2007/59/EC)
Without mutual recognition of train driver licenses, international operators would have to consult with other national safety authorities (NSAs) for a bespoke agreement for UK-based international drivers which would be complex and costly. Services may also have to be halted whilst this is undertaken.
Clear customs and border control
One of the primary concerns about potentially defaulting to a World Trade Organisation (WTO (GATS)) arrangement due to lack end-state agreement or without a transitional arrangement, would be the impact of additional customs controls on borders. Primarily this would have a significant negative impact on international passenger services and freight being transported through the Channel Tunnel. It could also increase delays at ports, having a knock on impact on capacity and planning of rail freight services across the network. Anecdotal evidence from discussions with colleagues in Switzerland suggest that imposing customs at rail borders can create delays of over an hour and depending on density this can create queues of 30km.
It is important to take into account the complexity any customs arrangement could have for rail freight going directly via the Channel Tunnel, as well as the impact delay and congestion of goods would have on ports. This can lead to cancellation, poor loading and consequent poor revenue for rail freight operators. The rail freight market is very sensitive to delays and cost increases. Any uncertainty, even for a short period of time due to the lack of transitional arrangement could have the effect of dis-incentivising international rail freight in its entirety.
International station managers and operators (HS1 and Eurostar) would need time to find more space to cater for customs controls on arrival if these were required; a transitional arrangement would mean that any operational or accommodation changes could be made. Furthermore, end-to-end journey times would be strongly affected without a transitional arrangement, even if a small proportion of customers were regularly checked on arrival. Again, this could dis-incentivise cross-border rail travel having an impact on the already tight margins for operators.
In addition to the ability for passenger services to be able to continue to travel through the Channel Tunnel it is essential that freight wagons bearing a recognised UIC registration code are also still able to come into the UK.
RDG members need to retain access to the EU market to offer passenger and freight services overseas, and sell expertise and consultancy.
The EU has enhanced opportunities for international trade for rail British companies. In February 2013 The Commission unveiled proposals for the Fourth Railway Package, dubbed the 'final step' towards the legal framework for a single European rail area. These proposals were finalised on 14 December 2016 and will seek to open up the European rail market to greater competition. In addition to those British operators already accessing the EU market, this package will create greater opportunities for British operators to access public service contracts in Europe. As Britain has been at the forefront of liberalisation, and British operators have demonstrated an ability to win and run successful public service contracts (franchises), they are well placed to win this further international work. RDG has welcomed the participation of non-UK operators in the franchise market and would wish to see this continue both through transition and in any final agreement with the EU.
A transitional deal would need to ensure that British railway operators who run public service contracts (PSCs) in other EU Member States at the time the UK exits the EU could continue to do this at least until the end of their existing contract. Reciprocal access of EU member states’ markets for British-based operators may be conditional on the UK adhering to the Fourth Railway Package and allowing non-UK based companies to bid for franchises. Application of the Fourth Railway Package would be covered by the Great Repeal Bill.
Reciprocity will also be relevant for freight operators including those with non-EU or UK ownership operating in the EU.
RDG members would be concerned if all technical standards had to be applied, regardless of operational necessity or business case, where the industry had no influence over how they were designed. The industry could support disapplication but rather would seek a mode to influence standards. Keeping common standards in place for the limited number of lines/systems used for international traffic would also avoid problems.
Technical Specifications for Interoperability (TSIs) are the specifications by which each subsystem or part of subsystem is covered in order to meet the essential requirements and to ensure the interoperability of the European Community's high speed and conventional rail systems. There are a number of TSIs that currently have legal applicability in the UK:
TSIs are regulations and as such will be implemented into UK law by the Great Repeal Bill. However, TSIs are evolving and changing on a regular basis. This work is undertaken by the EU Agency for Railways (The Agency). Whilst the TSIs are still applicable, the rail industry would seek a transitional arrangement by which we were still able to be a member of The Agency.
Members need to retain access to the findings of EU research and innovation programmes.
Shift2Rail is an initiative bringing together European rail operating companies, infrastructure managers and suppliers. European Regulation 642/2014 establishes Shift2Rail and the initiative uses this foundation to access Horizon2020 funding from the European Commission to lead research and innovation projects. Shift2Rail secures direct funding (grants) for members and also generates non-financial benefits for members such as technical learning.
Network Rail is a founder member of Shift2Rail. There are no specific terms regarding membership in the regulation that establishes Shift2Rail. However, it is highly likely that UK companies’ continued membership and ability to access grants and non-financial benefits will be subject to individual negotiation with the EU; it is critical that in the very least as part of any transition UK companies can retain any existing involvement until the end of its life-cycle. This includes the Shift2Rail cycle which concludes in 2020 and the cycle which will started during the negotiation period between the EU and UK and Network Rail intends becoming a part of.
Underlying the seven key principles for rail in Brexit are some key requests to support any transitional arrangement.