Latest Rail News

04.09.17

RIA: Government must do more to end stop-start NR funding

Government must do more to support the rail sector, particularly in relation to the stop-start funding of Network Rail control periods and the peaks and troughs of other major projects, the CEO of the Railway Industry Association (RIA) has stated.

In an open letter to Lord Adonis, chair of the National Infrastructure Commission (NIC), Darren Caplan said he was saddened to read recent comments by the peer on the “indefensible margins” of contractors in the construction industry.

Lord Adonis, the former Labour transport secretary who has led NIC since 2015, told Construction News he had no concerns that average margins had slipped into negative territory for some of the industry’s top contractors.

Instead, he stated that it was a sign that the public sector is getting a good deal at last. “Indefensible margins have been cut down to size, I’m not concerned at all,” said Lord Adonis.

But Caplan stated that, simply put, many of the largest rail construction companies are actually currently making a loss as opposed to benefitting from so-called “indefensible margins”.

“In any case, reduced margins simply mean less money available to invest in innovation – a top priority of both the government and presumably the NIC – and less available resources to spend on the many SMEs further down the supply chain,” he argued. “It doesn’t really benefit anyone to criticise the sector in this way.”

While admitting that the sector can do better on cost, the RIA boss stated that his members are working to examine how they can reduce the costs of renewals so that the taxpayer gets the best value they can.

“However, to help us to do so, we need support from government, particularly in relation to the stop and start funding of Network Rail control periods and the peaks and troughs of other major projects,” explained Caplan. “This ramping up and then slowing down of work only helps to create uncertainty, reduce the level of investment in people, plant and innovation and ultimately, increase costs for the taxpayer.”

Recently, transport secretary Chris Grayling agreed to a higher volume of renewals activity in CP6 in order to “maintain safety and improve on current levels of reliability and punctuality” – but pushed back the announcement of a funding envelope for the control period, citing the need to review Network Rail’s poor approach to efficiency.

Moving to a regularly reviewed rolling five-year programme would stop this feast and famine approach to funding, argued Caplan, meaning the supply chain can work far more efficiently.

“We would welcome the opportunity to collaborate with the NIC to see how the National Infrastructure Pipeline can be used to help smooth this profile through the use of annual reviews,” he continued.

“The UK rail sector is seen as a world leader for delivering projects. As will be shown by Crossrail, the industry is meeting the challenge to deliver to time and budget, and is ready for the new challenges of HS2, Crossrail 2 and Northern Powerhouse Rail.”

(Image: c.Jonathan Brady)

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Comments

Lutz   04/09/2017 at 15:27

Many of the concerns expressed by the Industry are part and parcel of the job - they are also found in other industries. What the supply industry needs to address is it's own failings around it's inability to delivery which brought us to the current situation with the review of the industries ability to deliver efficiently.

David   04/09/2017 at 22:05

I agree entirely. As someone who is very much involved with the company in question it is impossible to build up the proper workforce or to make effective investments if the rug keeps getting pulled from underneath.

Ampox   05/09/2017 at 11:23

Do we want a national industry that can contribute to our trade balance, or do we want to hand out contracts to whatever foreign companies happen to be interested from time to time? The government needs to have a policy on this, which involves a steady stream of work that can be bid for by British companies to keep them in business and doing R&D that will provide a future revenue stream as well.

Tothehills   05/09/2017 at 15:29

I do not know whether to laugh or cry. What is the point of asking an incoherent government to have a coherent policy; when it only modus operandi seems government by conception (An almighty F* Up) and that is being polite.

GW   06/09/2017 at 09:37

The whole point of privatisation was to take away the start stop nature of funding, hence the Control Periods. Now we are back to a predominantly nationalised railway (DfT and Network Rail), the original problems are returning. That doesn't take away from the inept manner in which NR has operated for some years, added and abetted by the ORR.

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