‘We are like Millwall – the rest of the industry all hates us’, said John Smith, the managing director of GB Railfreight, as we head back to London after a tour of Felixstowe docks. Indeed freight is the Cinderella of the industry and the tremendous success of the passenger side ironically puts added pressure on the freight carriers.
Smith, a career railwayman, who clearly enjoys every minute of his job, is joking but is nevertheless also making a serious point. Both GB Railfreight and the port of Felixstowe are very much part of the transformation in the way that goods are moved around in the UK. GB Railfreight is a child of privatisation, one of the most successful companies to emerge from the upheavals of the mid 1990s. It was started in the aftermath of privatisation as an offshoot of Anglia which was one of the few start up companies to win one of the early franchises. ‘Let’s do freight’ one of the directors said and Smith found himself undertaking tasks such as ordering locomotives and dealing with shipping companies for which his previous career had not prepared him.
The first contract, which started operating in 2000, was with Railtrack, which was eager to break the monopoly of EWS, at the time owned by Wisconsin Central, which ran all the trains needed for maintenance and renewal of the track. Smith ordered seven Class 66 locomotives and soon the embryonic company was battling for the container market with Freightliner, at the time the only other significant player apart from EWS, in the rail freight market.
GB Railfreight has subsequently gone through several incarnations, being bought initially by FirstGroup and then sold onto Eurotunnel, which has invested heavily in its expansion. Turnover is around £130m this year and has risen steadily every year since the creation of the company except for a brief blip during the worst of the recession when it all but stagnated for a couple of years. The company now carries substantial amounts of coal and gypsum, and was also a supplier to Metronet, which was one of the London Underground infrastructure providers under the ill-fated Public Private Partnership.
Smith, who guzzles more Diet Coke than can be good for him, explains that to understand the rail freight market, each sector has to be viewed differently: ‘Apart from intermodal [containers], coal is the biggest market but it will not remain so. That will change and railfreight will have to adapt accordingly.
It is impossible not to be impressed when touring the Port of Felixstowe. There are the largest cranes in the world, needed to cope with both high and low tides, and one of the quays is 2.6 kilometres long, seemingly stretching out into infinity in the morning mist on the November day I visited. Whole new areas are being opened up, partly reclaimed from the sea, to cope with extra demand. The biggest ships can now carry 18,000 TEUs (twenty-foot equivalent units which means, as most boxes are now 40 foot, that means around 9,000) and the cranes have to cope with the up and down movement of the tides enabling them to reach the top of the highest stacks at high tide, and stretch deep into the holds at low tide’
A little friendly tiff between Deborah Coe, the port’s customer relations manager who is showing us around, and Smith highlights the delicate economics of railfreight. Smith complains that the Port charges £42 for every container put on the train, and yet does the same thing for free for trucks. However, Coe points out that the trucks move up to the stacks of boxes, whereas the Port has to supply vehicles and drivers to move the containers on to the trains: ‘We are a business, not a charity’ she says crisply, though, of course, the Port’s use of rail is an important part of its corporate social responsibility agenda and looks good as part of its PR.
Smith says that the industry’s high fixed costs, around 60 per cent, mean that much money can be lost quickly if for some reason demand falls. A train becomes profitable, highly profitable, when it is full, but that is quickly lost if 20 or 30 per cent of the capacity is empty, In some cases, shippers share in the risk, paying a set fee for the train, while in others it is the rail company that bears the risk. It is a fast moving industry where to remain profitable requires being fleet-footed in negotiations and an awareness of the changing markets.
Smith’s Millwall comment is a reference to the tension between freight and passenger operators on the network. At one point during the run up to the negotiations over Network Rail’s Control Period 5 (which started in April), the Office of Rail Regulation had threatened to greatly increase access charges for freight trains which currently only pay marginal costs. This would, at a stroke, have wrecked the industry. Smith told me: ‘basically, I said, do you want to pay us a billion quid or so and we will all just leave, and of course the answer was no.’
Nowhere is the tension between passenger and freight needs more in evidence than on the Felixstowe branch. The hourly passenger service operated by Abellio on the branch between Ipswich and Felixstowe eats up capacity that could easily be used by the freight trains. As we sit in the cab of a Class 66 at a signal waiting for the 10 58 from Ipswich, Smith and Kelvin, the driver, estimate how many passengers there are likely to be – and when the train flashes by, they argue about who is right: ‘I reckon it was just three’, Smith says ‘typical’. The low usage off peak in winter is hardly surprising given that the 11 mile trip takes 25 minutes but the local authority and rail groups have been adamant that reducing the frequency would kill off the line. Indeed, politically, rail passenger services, however ill-used, are sacrosanct these days and no politician would dare to advocate closure or cutbacks in service (except up North where Westminster politicians seem happy to be causing havoc, a story for another day).
Practically, it would make sense to free up those paths for trains that can take up to 50 ‘boxes’ off the roads, boosting the 28 per cent share of rail for domestic containers landing at Felixstowe. That proportion has doubled in the past ten years. There has been some improvement as the opening of the Bacon Factory chord means that trains no longer have to reverse at Ipswich. Doubling the track on the branch would, of course, be even better, but but as I have mentioned before (Rail 738) there has been a long dispute over who exactly should pay. The Port did not see why it should have to pay when its rivals such as Tilbury and the new London Gateway have had not had to pay for their rail connections. At last there are now firm plans for a dynamic loop which will add some capacity but doubling is seen as eventually inevitable. Currently the line can take 30 trains per day (six of which are Smith’s trains) in each direction but Smith reckons that any extra capacity would be taken up quickly by the Port. For now, it is clear that these are good times for both GB Railfreight and the Port but with such high levels of investment and big fixed costs, both industries are dependent on the economy remaining buoyant. Oh, and also that all those boxes keep on coming from China.
Memo to Mark Carne: I was astonished on the cab ride from Felixstowe to Camden Road at the amount of old rail on the tracks, far more than anywhere else I have been. Given its value and also the untidy look it creates, surely much of this could have been removed during the numerous possessions on the line over the past few years. Time to do at the next opportunity.
TOCs failing to bother with revenue
My little rant a couple of issues ago about Virgin’s failure to bother with revenue protection, particularly in its northern outposts, attracted quite a post bag (or inbox flurry) from people inside the industry
A train driver, John, wrote how ‘I am booked to call into several stations that are managed by Virgin Trains, and not one station has a permanent barrier to prevent fraudulent travel. Rugby has 2 entrances with open unhindered access to all 6 platforms. Wolverhampton rarely has a barrier in force at the main entry point to its 5 platforms. Same at Stafford and Stoke on Trent and Crewe.’
The reason, he explains, is that for the most part, Virgin passengers are not in a majority at these stations. Therefore Virgin is reluctant to try to protect the revenue of other operators. Some of the fare dodging is clearly systematic and planned. John cites Runcorn where passengers going to Liverpool will let a London Midland service go because they know there is more likely to be an active guard, and take the Virgin train because checks beyond Crewe are never made.
He makes a good suggestion to get round this nonsense. He suggests making all mainline principal station booking offices serving more than one operator independent of either, and get them run by a third party with incentives to maximise takings. Or else, of course, as he says, the whole could be renationalised, but we won’t go there for now.
I am though, left bemused (as I am by other responses which I will write about in the future) Why do these capitalist organisations with such claims to efficiency fail to gather in the money they are due?