Thoughts on the rail industry

Thoughts on the rail industry

Overview – current state of play

The rail industry is in a state of transformation. There is a great deal of uncertainty around future structure, sources of investment, and the key challenge of raising customer confidence. On this latter point, it is quite likely that this won’t be realised until a Covid-19 vaccine is available along with a reliable and widely available test.

Having said that, the thorny issue of ticketing and fares has got to be addressed quickly. Negotiations with the treasury are ongoing around ideas to reflect new travel patterns and ensure value for money for regular rail users. Season tickets are defunct as people are likely to travel for work purposes less regularly/predictably and only when really necessary (and many will continue working from home given recent announcements). The treasury are concerned about losing the steady revenue that comes from season tickets, but many in the industry point out that attracting customers back will require innovation – perhaps something akin to an Oyster Card system?

A ‘macro’, government policy level solution might be to revisit charging for road use. As electric vehicles become more practical and popular, vehicle excise duty/petrol tax receipts are reducing in tandem. A technology driven system of charging by the mile could well support the cause of driving customer traffic back to trains. It is clear that government sees the rail sector as an ‘economic enabler’ and therefore an essential plank of transport policy. The more politically engaged train operators will be ‘on the front foot’, producing innovative business cases for investment with technology at their core.

TOCs and the end of franchises

The end of the rail franchising system is, by general consensus, long overdue. The EMA system has been extended (now the Emergency Recovery Management Agreements – ERMAs) and positioned as a transitional step to the ‘new system’. Quite what that will look like remains to be seen, but the government will look closely at fare box revenue as/when we gradually come out of Covid-19 emergency measures and try to reach an agreement with the private sector (train operators) around risk/reward. For any arrangements to work, fresh thinking and a new approach to inward investment (predicated on attracting fare paying customers) will be critical.

It will be interesting to see how private sector rail firms face up to the new world. Clearly the role of the owning group seems quite redundant; no bidding at all currently and the likely move to local decision making, regional collaboration (bringing together operations and infrastructure under local control) means that the private sector firms who adapt quickest are likely to be the winners.

Given the likely adoption of revised Williams’ recommendations, and the generally agreed imperative to ‘bring the industry together for the benefit of customers’, many are still predicting the formation of a new independent rail organisation – a new form of Strategic Rail Authority (SRA). It will be interesting to see how readily the government/treasury is prepared to cede control around strategy and funding. The potential quagmire of negotiations and compromises involved might make establishing this body too complicated (or result in something with so few teeth that it quickly becomes redundant).

The rail sector will emerge stronger and better from the current crisis as long as all stakeholders unite behind a clear, customer focussed, vision. This vision, and its delivery, must embrace innovation and make best use of technological advances in a ‘holistic’ way. This will be achieved as long as a new, forward thinking, cross industry culture of collaboration and technologically driven change is created and disseminated across and through the sector. A significant leadership challenge and one that requires a fresh approach.


Although a challenging time for the industry, this is clearly an opportunity for radical and exciting long-term thinking. A window of opportunity is apparent to bring exceptional leadership into play (new talent and fresh thinking from a diverse range of backgrounds) which, of course, is music to the ears of an industry head-hunter!

The focus on customer confidence, innovative fares/ticketing, (virtual) collaboration across the industry, new policy measures that address travel holistically rather than in mode of transport silos (road, rail, bus, air etc.) all present as an extraordinary opportunity. Those that lead the way in these areas will thrive including suppliers who have an opportunity to become industry partners of choice as we enter a new era for the sector.

Posted by Iain Brockbank on

Iain Brockbank

Iain Brockbank


Iain is a Director who leads Warren Partners’ transport, infrastructure and support services activity. Iain is extraordinarily good at bringing fresh perspective and constructive challenge to the most intractable issues facing business at a time of change.