Destination Growth: A New Future for Regional Railways in the UK
5 October 2016

Destination Growth: A New Future for Regional Railways in the UK

It is almost exactly a year ago that the Urban Transport Group (formerly the Passenger Transport Executive Group, pteg), launched a report by (JMP) SYSTRA about regional railways in Britain.

After an eventful twelve months, both politically and on the UK’s railways, I thought it would be interesting to look back and see whether the key messages from the report still had some currency, or whether events had overtaken them. So, let’s begin with a re-visit of the report, its aims and its main findings.

It was a fascinating job to be involved in. We were asked to take a long hard look at Britain’s regional railways, to untangle the facts from the myths and then to engage in some myth-busting, unpicking the idea that regional railways are forever destined to be the Cinderella service of the rail network. But we weren’t asked merely to look at their present and recent history. We were asked to develop and quantify scenarios for how regional railways could develop in the future.

Along the way we were able to quantify the vital role these services play in supporting the national economy. We showed that they have been growing very successfully over the last decade and a half, and that this growth is now being constrained by many years of under investment. Looking to the future we showed how a programme of investment could not only grow the market and deliver further benefits to the economy but could also make them much more cost effective to operate, substantially reducing the level of financial support they currently require.


Regional rail services carry more than three times the numbers of passengers than the much higher profile long distance (Inter-City) network.

They make a strong contribution right across the economy: As our city regions increasingly develop their service sector economies and concentrate employment in city centres, rail enables large numbers of people to be moved efficiently and effectively into these ever more congested places. In rural localities they provide important links for residents to access services and facilities in neighbouring town and cities, addressing issues of economic and social exclusion, while bringing vital tourism spending into their local economies.

And they have been a major success story: Far from being the Cinderella of UK rail, the regional network has enjoyed massive growth in recent years. Between 2002/3 and 2014/15, demand for regional services grew by 66%. Until 2012/13 the regional sector was the fastest growing part of the UK rail network and indeed remains so when measured against passenger kilometres (+74%), or passenger revenue growth (+151%). One of the regional train operators (TransPennine Express) carries the second highest number of passengers per available seat across the rail industry, second only to London Overground.

But they are becoming a victim of their own success: This huge level of growth has not been matched by an equivalent level of investment in infrastructure and rolling stock. Over the last ten years the average age of rolling stock has increased by 30% whilst in many places signalling infrastructure and operating procedures that date back to the Victorian era are compounded by the effects of track rationalisation in the second half of the last century. Lack of investment is already beginning to limit growth, and this will only get worse in the future.


However, it doesn’t have to be this way: Our proposition, backed up by our analysis, is that with investment in infrastructure and vehicles, regional rail has the potential to perform even better, delivering more benefits, more cost effectively.

And the timing is right: At the time of writing our report we concluded that there had not been a moment since the re-organisation of Britain’s railways at the time of privatisation in the mid-1990s when there has been a greater opportunity to develop our regional rail networks. Three dynamics were converging to create these conditions:

firstly, there was widespread acknowledgement that investing to support economic growth in the UK’s regions is vital to realising the economic benefits that the regions can generate;

secondly, there was real and growing progress towards the devolution of powers and funding decisions to the English regions, including for transport, and specifically rail investment;

finally, rail investment had rarely been so clearly at the forefront of UK Government policy. Proposals for investment in a new high speed rail network provided a once in a generation opportunity to build on the construction of these core high speed routes to develop complementary regional rail investment plans that link our regional cities and towns and take advantage of the openings that emerge from the rail capacity released by the high speed network.

By preparing a set of scenarios for the future featuring a rolling programme of investment to revolutionise regional railways and deliver exciting and transformational change, we showed that the regional rail network could deliver benefits to the economy worth as much as £10.5bn per annum at current prices. Around a quarter of these benefits arise from increases in GDP, as a result of agglomeration benefits from bringing businesses ‘closer’ together and by improving access to labour markets. The cost benefit analysis prepared as part of this scenario testing showed that the investment represents very high value for money with every £1 of investment delivering £4.36 of benefits, relative to a ‘business as usual’ approach to investment in regional railways.

Just as importantly, with a concerted long term commitment to investment over 30 years we found that it is possible to both reduce operating costs and raise demand significantly. This would help move the regional rail network from its present position where it requires a substantial level of subsidy, to one which operates close to breakeven.

Given that the regional network contains a diverse range of operations, including many socially necessary services in rural areas, we concluded that this would be a very noteworthy achievement.


Twelve months on: post Brexit-vote, a new Prime Minister, a new cabinet and a number of key developments within the rail sector, including the publication of the Shaw Report, the award of the new Northern and TransPennine franchises and with Transport for the North and Transport for the West Midlands beginning to hit their stride, do these conclusions still hold?

I would say that in terms of the fundamentals – that investment will deliver growth and improve the financial position of the regional network - this is still very much the case. The awards of the new franchises for Northern and TransPennine are predicated on investment and growth, with 500 new carriages, the phasing out of the unpopular Pacer trains, £55m of investment to improve stations and new services all promised. The plans being developed by Transport for the North and Transport for the West Midlands are following the successful model in Scotland of devolved administrations leading the way in committing to the future of regional rail networks.

Despite this, it is the earlier statement that ‘the timing is right’ is where some alarm bells are ringing. The widespread acknowledgement of the benefits of encouraging growth in the UK’s regional economies almost certainly still holds true. The Northern Powerhouse concept is facing its first real challenge with the departure of a Chancellor who was its biggest supporter, but the policy noises from central government, while appearing to shift more towards an overall British regional economic growth strategy than regionally focused initiatives such as Northern Powerhouse, certainly do not seem to be challenging the orthodoxy that something needs to be done to rebalance the economy.

The second statement on the progress on devolution of powers and spending is clearly linked to the first but there is no real indication that there is likely to be a significant deviation from the general direction of recent policy. Indeed the Shaw Report into railway funding earlier this year made much of the need for an increased level of local focus in the identification of rail infrastructure investment priorities.

Finally, the statement that rail has rarely been so high on the government policy agenda probably also holds true, although not always for positive reasons! However, after some uncertainty as to what the new cabinet’s position on HS2 was going to be, the new Transport Secretary Chris Grayling reaffirmed the commitment to press on with delivery of HS2 at the Conservative Party conference earlier this week.

So, it is probably fair to say that while the political and policy environment hasn’t got easier it hasn’t radically shifted away from the position of twelve months ago. And the prize of a regional rail network that could be moved from its present position where it requires a substantial level of subsidy, to one which operates closer to breakeven is still a prize worth pursuing.

To read the full report click here

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