The Sleeper's Blog

06.11.18

Crystal balls for Brexit

Source: RTM Oct/Nov 2018

Neil Robertson, chief executive of NSAR, starts a frank conversation about Brexit.

Have you noticed how it is almost impossible to have a sensible debate on the impacts of Brexit? The rules seem to be: take a firm, preferably dogmatic, position; talk about how history supports that position; refuse to entertain dissent; retreat to meet likeminded people; remain strangely bemused by the question, ‘what will happen next?’

On the basis that RTM readership are unlike normal people (i.e. are reasonable and rational), let’s pose a question. Brexit occurs – what will happen next? The answer is, of course, some things will change.

First of all, technical standards. The Railway Industry Association and others are doing a lot of good work on this, but it seems likely we will follow EU standards for a foreseeable period – and for most companies, not following those requirements would be unwise economically – so probably little change initially.

Approvals and permissions are more problematic and are also receiving a lot of attention. Permissions to operate (freight generally, trains through Channel tunnels, etc.) will not be so easy as some at least are wrapped up in wider negotiations. Common sense is likely to prevail initially, but additional costs and paperwork are almost certain in the medium term.

Business investment will probably go down initially, but infrastructure sectors are likely to be protected as they are one of the best places for governments to invest in. So let’s assume demand will still be there.

What about people? NSAR has been working on this on behalf of the industry, and there are a few facts to note and a few observations to make. For those who are particularly interested, the industry put forward a response to the Migratory Advisory Committee, who said it was well-evidenced and written, and then ignored it.

Research shows that, on average, 20% of the rail industry workforce are from the wider EU. This makes us less exposed than others, but it does mask some quite sharp areas of geographic exposure in the rail supply chain. There will be an impact as the government, through the OBR, estimate that half of them will not be available to us in future. So where is rail’s EU workforce?

  • A very high percentage of train cleaners;
  • Over 45% of rail supply chain generally, south of Derby;
  • This is mainly general construction workers, such as plant operators and steelfixers, but there is also exposure in specialist trades with existing skills shortages, e.g. electrification.

Will some go home and not be replaced? In a word, yes. It’s already started. Weak pound, strong economies in Europe, improvements in their home economies (more than double the UK rate of growth), skills shortages at home, and casual racism in the UK are all contributory factors.

Can’t we use an improved and refreshed point-based migration system to help us? Yes, in high-skill key areas with demonstrated skills shortages and large salaries. But the system is currently based on the applicant possessing a qualification from a recognisable institution. The bulk of our exposure is Level 3 and below, who are unlikely to have this. Further, it’s a lengthy process that is already in demand – staffing would need to go up significantly to cope with the required numbers. Overall, then, I suspect this will only be a small part of the answer.

This leaves two options: pay more to poach from other sectors or, radically, grow our own. NSAR estimates that wage inflation will rise from over 5% to 9% in key areas of demand as the diminishing pool of skilled people are fought over. Given that rail costs are already under the spotlight, this will have a pronounced negative impact.

Or we could train our own. In my conversations, this approach is universally agreed as being of merit. We are close to full employment now, but there is a significant group of young people who do not show up in the numbers and are available for work. They often need some additional support to be ready to take on an apprenticeship, which is why plans are being made to put these kinds of programmes in place.

Brexit will bring costs, uncertainty, and a one-off opportunity to refresh our industry, reaching further into the communities that rail serves. Let’s grab it.

 

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