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11.11.16

Economy ‘double whammy’ means rail investment still safe under Brexit

There are no signs that rail investment will slow down as a result of Brexit because it is related to the UK economy rather than to whether we’re in or out of the EU, a senior Network Rail figure has said.

Speaking to delegates at yesterday’s inaugural Northern Powerhouse Rail Conference, Andy Haynes, the infrastructure owner’s contracts and procurements director for Route Services, emphasised that the UK is the country which most invests in railways in Europe “by what looks like quite a long way”.

“The main funder at the moment, DfT, recognises that investment in the railway stimulates the economy through money and through services, infrastructure and infrastructure activity – and the conversion of that into extra capacity, reliability and train services then allows the rest of the economy to be stimulated,” he argued.

“So it’s a double whammy. Investing in the railway is good in itself. Efficient spend is good in itself. And the product of that, a better railway service, then further stimulates the railway.”

As long as the industry can convert what is “at the moment” government investment in the railway into “predictable benefits for the travelling public”, then the UK will continue leading the way in European rail investment, Haynes added.

“I don’t see any sign of that slowing down at all, because the equation isn’t related to whether we’re in or out of the EU; it’s about driving the economy for the UK. And if anything, as things might become uncertain elsewhere, this ought to be one certain place for the government to put their investment,” he said. “I think that the opportunity in rail is secure.”

But like many other speakers at the conference, which included a day-time supply chain-focused exhibition and a networking dinner, Haynes indicated that investment in rail might have to start coming from private sources going forward.

“What the government wants to introduce is this idea that there is a connection between investing in the railways and the return you get out of it,” he continued.

“So the DfT don’t want to be the only funder of rail; we must find different commercial mechanisms of getting investment in and connecting the return those investors get from the successes of that improved railway.”

The subject of Brexit later came up during a Q&A session at the TransCityRail North dinner, which included panellists from HS2 Ltd, Arriva Rail North, Alstom, Transport for the North and Network Rail.

Asked by the event host, BBC’s Richard Westcott, how the vote to leave the EU would affect the rail network, Alex Hynes, managing director of Arriva Rail North, argued the biggest issue for his own business was the impact it has on uncertainty for the economy and confidence in spending. He added that the uncertain economy could affect people’s decision to travel, which in turn damages the operator’s revenue and the investment made in its routes as a result.

But Duncan Sutherland, HS2 Ltd’s non-executive director, also argued that Brexit offers an opportunity to streamline procurement processes, which in turn would accelerate the time it takes to deliver infrastructure projects. He also highlighted the opportunity to boost skills and innovation domestically, which companies have previously said are at risk as a result of Brexit, and to increase the UK’s level of rail product exports.

Despite Sutherland’s optimism, several bodies have argued that HS2 is at risk as a result of the Leave vote, with even the company’s director of finance and operations admitting he is “worried” about the long-term impact of Brexit on the project. The head of the National Audit Office has also warned that balancing HS2 with other major projects will be more challenging than ever in the current climate.

Comments

Lutz   12/11/2016 at 11:42

There certainly will be changes. There will be a shift economic emphasis and priorities; this will feed through the changes in the planned projects. The comments also ignore the impact that the changes in the value of Sterling (and again after the USA elections) will have on costs; these will start feed through the supply chain. NR needs to be on-top of this, because without additional funding, there will be a need for further postponements. One key point to also be aware of; the details of the autumn statement have not been announced; the rise in Sterling over the last few days has come too late cover the impact of financial forces hitting the UK throughout this last year. There is a big funding gap, and extra borrowing may be a short-term fix, but we must now expect a sharp rise in interest rates which will affect our capacity to borrow and fund the national debt. So you know what's coming, despite all the good intentions.

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