The value of the market covered in this Key Note Market Review was an estimated £6.29bn in the year ending 31st March 2005, a rise of 7.1% on 2004.
Press Release Body = Railway Industry Market Review August 2006
Executive Summary
The value of the market covered in this Key Note Market Review was an estimated £6.29bn in the year ending 31st March 2005, a rise of 7.1% on 2004. This figure represents the value of the services provided to the passenger and freight customers of the railway system of Great Britain at current prices. Turnover for contracted-out services and other products, including investment in the infrastructure of track, signalling and stations, as well as locomotives and other vehicles, was valued at £9.02bn in the year ending 31st March 2005, down by 11.8% on 2004.
The railway industry, as defined in this Review, comprises all the major railway services in the UK, both passenger and freight, including those provided by underground, metro, light rail and tramway systems. In addition, the international rail services provided by companies such as Eurotunnel and Eurostar are included. The activities of railways that are tourist attractions rather than transport operations are not examined. The main market sectors, which are covered in separate chapters of this Review, are: infrastructure providers; passenger train operating companies (TOCs); rail freight operating companies (FOCs); urban rail transport operators, including underground, metro, light rail and tramway systems; and suppliers and contracted-out service providers, which include rolling-stock companies and providers of engineering services and equipment. In 2005, passenger TOCs made up the largest sector of the market - with the exception of business-to-business markets - although, in terms of growth, this sector was outperformed by rail freight.
Under the terms of the Railways Act 2005, the Strategic Rail Authority (SRA) was abolished and many of its functions, including the key role of awarding operating franchises to TOCs, were transferred to a new Rail Group within the Department for Transport (DfT). These changes became effective in April 2006, and it remains to be seen how far this transfer of responsibility for national rail strategy from a semi-autonomous body to a government department will change the strategic direction of the rail industry.
Both the passenger and freight transport markets are, to a large extent, dependent on the level of activity and the rate of growth in the UK economy. The present economic climate remains favourable for companies operating in the market, with economic growth steady, and both inflation and unemployment levels relatively low by historical standards. Rail passenger markets benefit from the fact that work-related trips, both the journey to work and trips undertaken as part of business activity, are likely to be relatively inelastic to short-term changes in the economic climate. Rail freight, which serves markets for the carriage of industrial materials, is likely to be relatively unaffected by any short-term fluctuations in consumer demand.
Safety and security issues continue to be at the forefront of public concern following several high-profile rail accidents between September 1997 and May 2002, resulting in many fatalities, as well as the terrorist bombings on the London Underground in July 2005. However, the evidence is that the railway industry\'s safety record has been consistently far better than that of road transport over many years. In addition, even terrorist attacks, which are seen by many security experts as almost inevitable, are likely to have only a short-term effect on many of the markets considered in this Review, since much rail travel is associated with the journey to work or other essential trips.
Another concern of rail passengers and consumer groups is train punctuality. This has been improving, especially over the past 3 years, as a result of action taken by both Network Rail and the TOCs.
Recent government policy has sought to bring about a reduction in the number of franchises and to create a closer match between these franchises and Network Rail\'s route structure. This policy has started to take effect, with the granting of several new franchises effective from April 2006.
Although efforts to stimulate freight transport by rail have been made on many occasions in the past, rail has not been able to counter the competitive advantages possessed by road transport. The future of rail freight depends on a resolution of the problem that freight consignments by rail inevitably require at least some carriage by road, and hence require effective inter-modal transfer arrangements. If these issues can be addressed, the decline in both the volume and share of rail freight may be halted.
In recent years, most metro and light rail systems in the UK have experienced increased patronage. However, many projects that seemed well on the way to being implemented have been cancelled for a variety of reasons, mainly relating to the increasing costs of such projects.
Forecasts for the UK economy to 2010, assembled by HM Treasury, suggest a scenario of little change compared with the previous 5 years, and are broadly favourable to the continued growth of the UK rail transport sector. Although some areas of uncertainty remain, including those associated with the national and international security situation created by the threat of terrorism, in the absence of an actual attack, such concerns are likely to have only a minimal impact on economic growth or demand for transport.
2025
