Transcript of oral evidence to the Transport Committee: Rail services and infrastructure

Oral evidence: Rail services and infrastructure, HC 361

Wednesday 6 December 2023

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Members present: Iain Stewart (Chair); Jack Brereton; Fabian Hamilton; Karl McCartney; Grahame Morris; Gavin Newlands; Greg Smith; Mick Whitley.

Questions 1 - 58

Witnesses

I: Malcolm Brown, Managing Director, Angel Trains; David Clarke, Technical Director, Railway Industry Association; and Nick Crossfield, Managing Director, Alstom UK and Ireland.

Witnesses: Malcolm Brown, David Clarke and Nick Crossfield.

Chair: Welcome to today’s Transport Select Committee session, where we shall be taking a look at the rolling stock part of the railways. Before we start, are there colleagues who have an interest they need to declare?

Grahame Morris: Thank you, Chair. I am a member of Unite the union, which organises at a number of manufacturing plants, including the Alstom train manufacturing plant that we will be asking about today.

Mick Whitley: I am a member of Unite the union as well.

Fabian Hamilton: I am a member of the GMB union.

Chair: Thank you very much. Welcome to our panel. For our records, will you briefly state your name and organisation?

Malcolm Brown: I am Malcolm Brown. I am the chief executive of Angel Trains.

David Clarke: I am David Clarke. I am the technical director of the Railway Industry Association, which is the trade association for the rail supply chain. Our members include Alstom and Angel.

Nick Crossfield: I am Nick Crossfield, managing director for Alstom’s businesses in the UK and Ireland.

Q1                Chair: Thank you. We are grateful for your time this morning. To start with a very general question, I invite each of you to give a broad overview of how healthy the UK rolling stock manufacturing sector is at the moment. Could I start with you, Malcolm?

Malcolm Brown: By all means. It is obvious that post pandemic, and during the pandemic, there was a drop-off in passenger numbers. We have certainly seen them grow back to a reasonable level in the UK. That, needless to say, has had a sort of pause effect on rolling stock manufacturing in the UK. Having said that, a number of rolling stock orders are in play just now, actually on the factory floor. We have trains with Alstom that are currently being built in Derby. We have trains that have been delivered, as well. Thankfully, now, we can see the market starting to re-emerge. There are a number of orders on the stocks, as it were, that are ready to go, whether for Southeastern or TransPennine Express, but we need to get those under way. I would describe the market as having had a bit of a lull, but I can see some shoots of recovery coming.

Chair: Thank you. David?

David Clarke: I agree with Malcolm that there are shoots of recovery. The issue is that they are not going to come soon enough, and there remains a gap. We surveyed our members recently, and 83% expect a hiatus in work in the next 12 months. That is particularly acute in the rolling stock part of the industry. We published a report in July with the quite apposite subtitle, “making 2023 the year of opportunity not crisis”. The issue, currently, is that opportunities have not been taken up. We highlighted three areas: new build trains; the refurbishment of trains, which is sometimes forgotten; and the suppliers to both of those. All those sectors are seeing no new orders. Malcolm is quite right that there are current orders in the factories, but they are going to run out.

We called for decisions to be made this year, and suggested that there should be a focus on the 2,600 vehicles that will be 35 years old by 2030, of which 1,600 are diesel trains—an obvious opportunity to take some of the oldest trains off the network. The only order since then has been 10 trains for LNER, which really doesn’t touch the sides of the gap in the market. In our report, which I won’t go into now, we suggested ideas to plug the gap. We also suggested ideas to prevent a recurrence of the situation that we find ourselves in.

Chair: Thank you. Nick?

Nick Crossfield: I don’t want to repeat what the gentlemen to my right have said. As an OEM supplying into the market, I would characterise it short term as very challenging; in the next two to three years it will be hugely challenging. Medium to long term, as Malcolm pointed out, it is quite an attractive market. Particularly in the longer term—from, say, 2027-28 onwards—the UK market for rolling stock is predicted to be the second largest in Europe. Drilling down even further, the market for commuter rail in the UK from ’27-’28 onwards is probably the fastest-growing market in the European geography. Medium to long term, there are good prospects and high potential, but the short term is hugely challenging.

The other grave concern that I have about the UK market for rolling stock is that not just in volume but in technology this country is way off pace in terms of decarbonisation. In most of the major developed rolling stock markets in the spaces around Europe, and around the world, where most of the major OEMs operate, decarbonisation is accelerating at a pace that we do not see in this country. If we are to build a capability here and not be a net importer of that technology in future, we need to accelerate our efforts to introduce new technologies, as well as securing a much more stable volume pattern going forward.

Q2                Chair: Thank you. The summary position is that there will be a hiatus and then potentially a brighter medium to long term. I appreciate that you might not be able to talk about individual discussions that are happening, but can you give us a bit more of a flavour of what types of discussions are under way at the moment that have not yet led to a specific order, and what the likely timeframe is for those to be made public?

Malcolm Brown: There are a number of orders or potential orders that are public at this point in time. There is no reason why not. As I mentioned, we have Southeastern with a potential new build order, and TransPennine Express with a new build. ScotRail is slightly further behind, and Northern is slightly further behind again. Those are reasonably sized orders that the market will compete for. There is dry powder in the market looking to invest in the new trains, so I don’t believe there will be an issue as to appetite. The trick is to exercise those in a reasonable fashion, although not all at once, as that would create a boom and a bow wave. We want a reasonable beat rate to respond to market demand and not simply to make trains for trains’ sake. There is a need: we need to replace a number of ageing trains, as David said, get the beat rate going and get them out there.

Chair: Do the other witnesses have something to add?

Nick Crossfield: We are engaged in conversations about the specific issue we have in Derby which, as some of you will know, is the UK’s largest facility for rolling stock manufacture. I cannot go into detail, obviously, because the conversations are ongoing, but we are hopeful that there will be a positive resolution in the near future.

The conversations mainly revolve around the acceleration of previously delayed opportunities to the market now. A good example is the one that Malcolm mentioned—Southeastern. Originally, it was due to come to the market several years ago; the pandemic happened and it was moved to the right. There are specific conversations about bringing those opportunities to the market now, but bear in mind that between an invitation to tender hitting the market, and actually cutting metal on a train, there is a lead time of three years. The procurement process is 12 months and it takes maybe 18 months to mobilise a manufacturing programme—the procurement and engineering.

The other type of discussion that is happening is about something that David mentioned, which is the modernisation and repurposing of existing fleets. In terms of lead times, it is a much quicker initiative to get up and running with factories and productive facilities. There is a rationale and logic to it, because overall spending is constrained in terms of new fleet—traditionally, the UK has had a quite healthy level of investment in new fleet—but there is a valid market that would fill a short to medium-term gap in the refurbishment of existing fleets. Again, decarbonisation can be part of the modernisation of a fleet. The Voyager fleet, a high-profile diesel fleet, is an example: you could hybridise it and essentially life-extend it. Those, primarily, are the two types of conversation going on: the acceleration of new rolling stock mandates, and trying to agitate the market for modernisation and refurbishment of existing fleets.

Chair: Thank you. David, do you have anything to add to that?

David Clarke: If I may, I will take a slightly more strategic, long-term look. Both the other witnesses are quite right: there are glimmers of hope and some opportunities in the market, but they have not yet been converted into orders. Until they are orders they do not exist. Looking back in history, I have a graph of the order book profile for the main line industry over the last 40 years. Automotive or aerospace would not be able to cope with that. A manufacturing or refurbishment industry like rail is no different; it is really difficult to manage a business and to invest in people, plant and process to make the business more efficient with that sort of background.

If, as we have done in the past, we continue to replace all trains when they are pretty much life-expired, we will inevitably just repeat the pattern at, say, a 35-year interval. We need to break that cycle. We have calculated that the average level of orders to sustain the industry is about 600, including London Underground—TfL—orders. We think there is a way of doing that if you have a strategic overview—call it a guiding mind: somebody looking to the sustainability of the industry as well as just replacing trains.

Chair: Thank you. We will want to dig into some of those points later.

Q3                Fabian Hamilton: Can I take you up on the last point that you made, David? Many years ago, just as the railways were being privatised in the ’90s, I was in charge of industrial investment in the city of Leeds, which is where I am an MP. We had a huge manufacturer called Hunslet engineering—you have heard of it—that had been going for many years, way back into the 19th century. An Austrian conglomerate had started investing in it and had changed the name to Hunslet Transportation Projects Ltd—TPL. They were manufacturing some really high-quality trains, at a good profit. Then privatisation came along and the order book dried up.

My question—you have partly answered it—is whether, with the market system that we currently have, any British manufacturer that does not have global or international backing is in danger of going out of business, not because it is not profitable but simply because its order books dip, rise and dip, and there is no certainty? If you are going to plan, you need some kind of certainty, as far as the market can predict that. You have all touched on it, but what are your thoughts on remaining British firms being viable?

David Clarke: You are quite right that certainty is the key. I don’t mean absolute certainty, but confidence that there will be a flow of work to the market that can be competed for. That sort of confidence that there will be a flow of potential orders gives confidence to invest in people, plant and process. Generally speaking, most of the significant businesses are now internationally owned, including the refurbishment businesses, with one exception. They will make very rational decisions based on what they see as the global market. As the other witnesses said, in the medium term the UK is an attractive market, so our challenge is to show that it is continuously attractive and that there is a steady flow of opportunity. At the moment we see a bust, a gap or hiatus, followed by opportunity. Rational businesses cannot hang around waiting for the good times when they are burning through cost today.

Chair: Karl, you want to ask a quick supplementary.

Q4                Karl McCartney: Yes, thank you. Mr Crossfield, you seem to have bought into the net zero credo, so within the rail industry which way do you think you will go? Will you go down the route of battery power, electric power? Or do you think you will take the Japanese route and maybe look at hydrogen?

Nick Crossfield: I will say a few words and maybe then David will come in. It is horses for courses. We supply all the technologies at present. We supply hydrogen, battery, battery hybrid. Very close to home we are supplying a battery electric hybrid in Dublin. It depends on the nature of the application. Hydrogen, great though it is, is not suitable for all applications. Similarly, battery lends itself to certain types of environment but not others. The best way to answer the question is that I think whatever decarbonised portfolio we have going forward, it will be a blend of different technologies.

Q5                Karl McCartney: That is music to some of our ears. We think the automotive industry should take a lesson from the rail industry, in that case.

Nick Crossfield: One thing we are clear on is that diesel does not have a sustainable, bright future, in whatever dimension. I speak under the control of, maybe, David on that. You would expect a healthy market, from a decarbonised perspective, to exhibit all the available technologies, and it really is horses for courses.

Q6                Karl McCartney: With the refits of some of the rolling stock, are you looking at power plant refits?

Nick Crossfield: Yes. We have been discussing some of the acceleration opportunities with fleet providers, and part of the modernisation or life extension of those assets is giving them decarbonised capability, which will give them an extra, say, 10 or 12 years of use. By doing that we hope to take the burden off new fleet replacement, because it is an extremely expensive capital item. David, do you want to add to that?

David Clarke: Yes, thanks; I can build on that. Nick says it is horses for courses, and that is absolutely right, so let’s try to define what the courses are. Before carbon was an issue, electrification was a well-proven, cost-effective way of running an intensively used railway. That is why most railways in the world are roughly 60% electrified—

Karl McCartney: If cheap electricity is available.

David Clarke: Yes, but ultimately, whether it is battery or hydrogen they are powered by electricity. Electrification has traditionally been a cost-effective way of running an intensively used railway. That is still true. You now get carbon and air-quality benefits as well, but you are not going to electrify the whole of the network. We think a core of about 60% or 70% of the network is about the right balance. At the moment we are going to miss 2050, in terms of net zero, unless we get our skates on with electrification. It is recoverable, but we need to get moving.

That leaves maybe 30% or 40% of the network, which is where you can use battery or hydrogen. We think battery is probably the major solution, with hydrogen in certain niche areas. That means—again, coming back to the hiatus we see today—that if you were to replace the 1,600 oldest diesels that are running around the network now with, let’s say, battery or hydrogen multiple units, we would call that a no-regrets decision. Wherever you put them today, you know that even in 2050 you are going to have 30% or 40% of the network to put them on. They are what we call cascadable, in the jargon.

Q7                Karl McCartney: Roughly what is the cost of that?

David Clarke: The cost of not doing it is that very soon you would be running around on 40-year-old diesels.

Karl McCartney: But what I asked you was: what are the costs financially of doing that?

David Clarke: Colleagues here might be able to speak to this better than I can, but I understand that we are seeing battery electric units on a par, cost-wise, with diesel multiple units, so it would not cost any more than buying a new diesel, not that we would want to do that because, as Nick said, we don’t think we should be buying any new diesels. By the way, it is the fuel, not the internal combustion engine, that is evil, because there is the opportunity on the 40% of the network that you would not electrify to use synthetic or HVO fuels in freight locomotives, for instance.

Q8                Karl McCartney: I am pleased to hear that. Just one quick question; I don’t know who will want to take it. You mentioned that procurement takes at least a year. The industry had, 15 to 20 years ago, two individuals who were in great demand because they were the procurement experts. Has the industry got better? Are there a number of different sources for procurement expertise in the industry in 2023?

Malcolm Brown: I would say yes. I think, if you look at the manufacturers, we have seen a change of name over the door, but you have Alstom and Hitachi joining the market, and Siemens and CAF all active in the UK market. In terms of financing, we have seen new entrants come into the market since 2015, so the market has expanded and there are other opportunities.

Karl McCartney: Thank you all very much.

Q9                Mick Whitley: David, you were talking about battery trains. What is the supply of lithium like? Is there an unending supply in the world or is it limited, if everyone is going to go for battery operated trains?

David Clarke: The rail industry’s battery requirements are going to be very small compared with those of automotive, so in creating a global supply chain for battery we are going to follow automotive, I suggest. We need bigger batteries, obviously, but essentially the automotive industry is going to create, or arguably has already created, a supply chain that we will be able to benefit from.

Q10            Jack Brereton: I want to ask some questions about HS2 particularly. Obviously, there have been some changes to HS2. How has that affected the order book and the future? It might be worth going to Nick, first.

Nick Crossfield: There is a great deal of uncertainty on HS2. The announcements about phase 2 caused a level of uncertainty, certainly in my business. We have the order to produce the rolling stock for phase 1, and phase 2 was an option there, too. Where we sit today, we don’t have complete clarity on the timing and scope of the order. The original order was for 54 very high-speed trains. Production is due to start on 26. Based on announcements and decisions that have been made, influenced in particular by what I might call the Euston question, there is some uncertainty as to precisely how many trains will be required and over what time period they will be produced. That is a conversation that is going on right now with HS2 Ltd and has not yet concluded.

Jack Brereton: Malcolm, do you want to come in?

Malcolm Brown: I would like to pick up from where Nick was. The rail system is like any system: it is a system, and if you make a change to part of that system it will have knock-on consequences. You have to look at it holistically. It is about rolling stock, but it is also about the depots and stations. It is the whole system. With the changes that have been made, rightly or wrongly, this is now the moment to step back and assess the full system, and say, “What do we need, and where do we need it?” But don’t forget that there is a system.

It is not all about London to Birmingham. There is a system. West coast serves many different places that HS2, in its own microcosm, was not going to serve. The tilting Pendolinos run up to Glasgow, and if you don’t have those, the journey time lengthens by about 24 minutes. It is the equivalent of moving Glasgow about 30 miles north—metaphorically; I am not suggesting we do that—or London moving to Brighton. It is going to take longer. There is a lot of focus on HS2, but there is a complete system there that has to be looked at and reassessed, now that the decision appears to have been taken.

Q11            Jack Brereton: I agree about that. In terms of the specific agreement that is in place on this, is there flexibility in the specification? Say there was a need for more tilting rolling stock, would the agreement that is in place have the flexibility to change what was originally specified, and to say, “Yes, we might have some of what was originally decided but we also now want instead some of that rolling stock to tilt”? Would there be that flexibility?

Nick Crossfield: No, the contract has a train technical specification, so there is a specification for the vehicle, and the contract for HS2 rolling stock is a very traditional contract. It is a fixed-price contract for a defined number of trains to a specification. That is why Malcolm’s point is extremely relevant and valid. Because of the announcements that have been made, there is invariably a conversation to be had to see whether the scope as defined in the contract is still valid. At the moment, based on where we sit today, that is the contract. The contract that is in place between the rolling stock manufacturing company, which is a joint venture between my business, Hitachi and HS2, is for the production of 54 very high-speed trains to a precise specification for that time period, but we know there is a conversation to come on how that has been impacted by the announcements that have been made.

Q12            Jack Brereton: If the Department wanted, say, to cut that number in half and instead have half the trains tilting, a completely new contract would have to be drawn up.

Nick Crossfield: It is a material change, and under the terms of the existing contract that would be a material discussion.

Q13            Jack Brereton: Would there be financial implications of changing the contract?

Nick Crossfield: There are financial mechanisms in the contract that protect for—let’s call them—abortive costs, which are redundant and dead as a result of a material change to the contract. I do not have the detail with me today of the precise terms included in the contracts, but I understand that there is a degree of protection in them.

Q14            Jack Brereton: When do you expect that decision to be made?

Nick Crossfield: As soon as possible. I have a team of people. I have an organisation that is mobilised. I have x hundred engineers designing the train, to a specification, and I have an industrialisation team mobilising the factory for a production process that is due to start, as I said, in 2026. That work is happening now, so cost is being incurred right now. It is a bit like a taxi meter. The meter is running so we need clarity as soon as possible.

Jack Brereton: You are still progressing at full pace.

Nick Crossfield: Because we have been instructed to do so. The instruction from HS2 Ltd today is, “That is the contract. That is the scope. That is the spec. Build it.”

David Clarke: Can I make two quick points to add to that?

Jack Brereton: Please do.

David Clarke: The cancellation of the subsequent phases of HS2 is very damaging to the future functioning of the railway in the way that Malcolm described, but it is also an extreme example of how not to instil confidence in the market. International investors—not just looking at the rail industry, although we are looking at it parochially here—are not going to have a great deal of confidence in future pipeline promises, given what has happened with HS2.

Q15            Gavin Newlands: This is a point of clarification. Essentially, the decision has been made about HS2. I have asked Ministers about the repercussions for passengers up the west coast main line, in that the benefits of HS2 will deteriorate rapidly the further north you go on the west coast main line, which was rebutted by Ministers. With the current plans as they are, and if the current rolling stock order remains unchanged, and without a significant upgrade to the west coast main line infrastructure at the moment, are there actually disbenefits to passengers in Glasgow, for instance, from HS2 trains running up the west coast main line to and from the central belt?

Malcolm Brown: There are lots of different ways of cutting it, but to go for a like-for-like basis, take the 9.30 train out of Euston up to Glasgow, about 4 hours 30 minutes. Your journey time without tilt will extend by about 20 to 24 minutes. It will be the equivalent of going to Stirling rather than Glasgow, or Brighton rather than London if you are going the other way. Tilt gives you a time advantage because the speed on the track can be increased and therefore for the passenger the benefit is a time advantage.

Q16            Gavin Newlands: Do you think, therefore, that we have to look at changing the plan on rolling stock, going either to fully tilt or to an extra tilt, plus the current order that is on the books?

Malcolm Brown: I revert to what I said previously. I believe, and I think, the Department for Transport is reassessing the whole system. It has to be a combination, not going for one and not the other. You have to look at it.

To go to your key point, you have a benchmark now which is a journey time of 4 hours 30. Surely that is what you should be protecting. Right now, tilt and the Pendolinos give you that advantage. You do not want any detriment to that. However the system works, and whatever combination it is, surely that is your benchmark.

David Clarke: To build on that, I am not across all the detail but my understanding is this. It is commonly understood that the west coast main line in the Crewe area is pretty full. If we try to put an extra six trains an hour into that, coming off HS2 phase 1, in simple terms they have nowhere to go. You will end up with no net increase in the number of trains. You will have to sacrifice some existing trains to get those six in. If you put in non-tilting trains, you will get the scenario that Malcolm described.

Gavin Newlands: It is interesting that Ministers deny that being the case. Thank you, Chair.

Chair: Three colleagues want to ask supplementary questions before we move on: Karl, Mick and Jack.

Q17            Karl McCartney: This is to all three of you. I want to bring in a dose of realism. None of us likes the decision that was made to cancel part of HS2, but do you not see that the costs were spiralling nearly out of control? Yes, tunnelling is very expensive, but engineers and consultant engineers were earning an awful lot of money and there was no real control of the cost. Ultimately, do you think there were too many consultant engineers and not enough industry experts involved?

Malcolm Brown: I will say categorically that I do not have that detail so I am afraid I cannot proffer a view on that.

David Clarke: I am not across all the detail on that, but what I would say is that all the work was competitively tendered. I am reading a book at the moment by a gentleman called Bent Flyvbjerg, “How Big Things Get Done”, which suggests that HS2 phase 1 is not unusual in having those kinds of issues. I won’t go into Mr Flyvbjerg’s theories, but he puts forward a pretty compelling view as to how big projects should be managed differently around their risks.

Nick Crossfield: To date, I think HS2 has been largely an infrastructure project and not a rolling stock project. That is why it is probably a little bit beyond our brief right now.

What has not helped HS2 are two things, and those two things drive a need for consultants and additional information. The two things are complexity and change. Phase 1, particularly the infrastructure works around London and the closer to London you get, is an incredibly complex project. It is, I would say, pretty much unprecedented. The only thing that would be comparable would be Crossrail, now the Elizabeth line. That is a successful project right now.

The other thing that has not helped them is change. Again, the general law of major projects is that you need to minimise change. As soon as you start to change things, and change designs mid-stream, that just explodes the cost envelope, as you say. You need to be very disciplined. I know it is an incredibly complex project, so I cannot comment. There are incredibly committed people trying to manage it. I don’t think it was a very easy gig for them at all.

Karl McCartney: Thank you very much, a couple of you, for putting your head above the parapet on that.

Q18            Mick Whitley: I would like to ask Nick a couple of questions. Were you given any advance notice of the Government’s changes to HS2?

Nick Crossfield: No. I think it happened around the time of the Conservative party conference. Like the rest of the industry, I have dialogue with the Secretary of State, Mark Harper. In fairness to Mark Harper, he took time over those two or three days. I had multiple calls with him to discuss the nature of the changes and what they were proposing. He took my counsel on the impact of those changes on the contracts that were already let, in terms of the rolling stock mandates. We shared a dialogue, but in the run-up to it, no.

Again, in defence of the Government, it is understandable because an announcement of that magnitude is a pretty major announcement. I can understand that it was incredibly sensitive, and they needed to have absolute alignment on their decision before they went out to market with it.

Q19            Mick Whitley: Do you get the impression that the DfT cares where the trains are built or made?

Nick Crossfield: As I said, medium to long term the UK will need a major volume of rolling stock. No doubt. What the UK needs to decide is how it wants those trains to be supplied. Quite frankly, as David has just pointed out, I sit as part of an international group. I run a very large part of that group, but I am part of an envelope that spans the world. We have 15, 20 or 25 rolling stock plants across the world. That global portfolio of manufacturing assets is managed in a very strategic way. Basically, where is it best to produce? For group colleagues it is a very easy decision for them to say, “Do you know what, it’s too difficult there so I’ll produce the trains in north Africa, and we’ll import them to the UK.”

What the country needs to decide is how it wants its trains supplied. I speak specifically now to my facility. Today, we employ 3,000 people on the site itself, but the 3,000 people on the site support a further 15,000 in the local supply chain. If you look at what we spend, 70% of our spend in producing those trains is UK spend. Only 30% is from outside the UK. I can still supply trains to the UK to supply Southeastern, but with an international supply chain. I could completely convert the UK, and what is a very deep facility at the moment—

Mick Whitley: This is at Derby.

Nick Crossfield: This is Derby. I could convert Derby from a site that employs 3,000 people, supports about 15,000 people outside and spends £1.4 billion, as a rough order of magnitude, in the local supply chain to a facility employing 300 people, importing major sub-systems and structures from abroad. We would final-assemble them in Derby, test them and supply them to the market. That is a very easy transition to make. It is not one that I want to make, and it is not one that I believe the company should make. That is why we are actively trying to persuade stakeholders in this country, “You need this capability.” The capability that you have is not just about producing trains for the UK market.

In that Derby facility I have 450 engineers on site who are highly paid and highly skilled people. Roughly 50% of the output from that group of engineers is exported. It is not for my projects in the UK: it is to support projects in Brazil and the middle east. The worry is that if you do not have a centre of gravity in the UK, you will lose that capability as well.

Q20            Mick Whitley: What would happen to suppliers if Derby closed?

Nick Crossfield: It is actually happening right now with Aventra, as you know. We are coming off the back of completing one of the big programmes. Malcolm referred to it. We have supplied 2,500 cars to five lines: Elizabeth line, GA, South West, West Mids and C2C. They are great trains, for those of you who travel on the Elizabeth line. It is a fantastic product and there has been an unbelievable reaction to it.

We finish the manufacturing of those programmes at the end of January. In six weeks, we go from an annual output of 650 cars, employing 3,000 people, to zero. That is at the end of January, in six weeks, guys. Today, I have the supply chain already showing liquidations. My paint supplier has gone into insolvency. I have a major on-site embedded supplier that provides my wiring looming and employs several hundred people permanently on the site. They have announced this week to their workforce that at the end of January it is done.

That is why I said that the timing of these decisions is critical. If I do not get clarity in the next six weeks—it is six weeks, guys—it all goes. To answer your question, in the future Southeastern will be pulling in from China and the middle east. We will take our wiring loom from north Africa. We will take our body panels, which will come in pre-pressed and ready for flat pack, from China. We will take frames from central and eastern Europe. It is a very different supply chain. Once you lose it, guys, you don’t get it back. You do not get it back.

Q21            Mick Whitley: Going back to the original question I asked, what vibes are coming from the Government? Do they understand this?

Nick Crossfield: All I can say is that conversations are ongoing. They are ongoing at Secretary of State level. They are engaged and involved. Those conversations are not yet over. They are ongoing. I obviously cannot go into the specific details because they are still ongoing conversations. At this stage we are hopeful—not certain, but hopeful—of a positive outcome.

The overriding objective is that it is imperative to maintain capability to cover a short-term period. As I said earlier, from 2026-27 onwards the market for UK rolling stock grows. It is the second largest market in Europe. For the UK commuter, who is our bread and butter, the growth rate from 2027 onwards is 28% per annum. That is a market everybody wants and it is a market that we will supply. The question we are addressing right now is how we are going to supply that market. Are we going to supply it from a fully integrated, embedded, vertically integrated manufacturing facility in the UK, with all the engineering and software capability that we need in this country to deliver those trains into service? Or are we going to supply it using an international supply chain and have a light front-end finishing veneer in the UK?

Chair: You may ask a very quick supplementary, Jack, because we need to make progress.

Q22            Jack Brereton: I just want to come back on the points that David and Malcolm made earlier with regard to HS2. First, we know that the capacity at Crewe would have been constrained with or without phase 2. Nothing was going to be proposed to address the capacity constraints at Crewe with HS2’s plans, so I would slightly refute that.

On the points that have been made around classic-compatible services on the west coast up to Glasgow, it was always going to be the case that we would have HS2 services running on to the classic network—to the points you made, Malcolm, about the 30-minute extension—so why was it that we did not have some of that tilting rolling stock included within the original specification?

Malcolm Brown: Perhaps I could take a step back on that, Jack. The original HS2 was almost an enclosed, captured line between London and Birmingham. It was a high-speed line. That was the original concept for it, and as such you could have a dedicated train on it that was a bit more wide-bodied and went extremely fast because it was on a straight line.

The journey time impact is a combination of not just the rolling stock but the infrastructure. The tilt gives you the capability to run on infrastructure that, frankly, just has bends in it. It allows it to run faster and gives you the time. I am not close enough to the details, but I believe the sections of HS2 that were built and dedicated on a new line ate into the advantage that the tilt had. It levelled the playing field, if that makes sense. You had a fast stretch where you went like the clappers in a straight line, and then you slowed down.

I keep coming back to this point. We need to look at that, and I think the Department are now doing so. From adversity, let’s take an opportunity. This is an opportunity basically to control, alt, delete and reset to look at the whole system. What is it that we need? It is about capacity and serving the passengers. It is about freight. We have just invested £125 million in Widnes, employing 100 people on the Pendolinos. They are as new. They are a fantastic train. We have a stopgap. We must reset and look at the system. What are we going to do with what is being built, and what is the optimum outcome for that? I know it doesn’t quite answer the question, but the point I am trying to make is that there is a combination of rolling stock and infrastructure. We must look at the whole system.

Q23            Jack Brereton: But you don’t think there was an issue in terms of the original specification, and that some tilting rolling stock should have been included at that stage?

Malcolm Brown: I genuinely do not have the absolute detail on it, but the concept was very much about using the fast infrastructure that was being built as a sort of dedicated HS2 to eat into it. What you started to lose were some of the benefits of a dedicated rolling stock, which was broader in body and had more capacity, when you dropped it on to what were termed the classic-compatible lines. You were already starting to mix, and almost dilute, what was originally set out.

Q24            Greg Smith: Before I come on to some of the broader points on the question of the non-HS2 rolling stock challenges for the next decade or so, I want to go back to some of the questions Mr Brereton asked earlier. On the other side of the HS2 coin, how big a market distorter has been the obsession with HS2 over much of the last decade, both from the finished product of a rolling stock perspective and from the supply chains? Has it distorted the market so that all eyes have been on that and off the ball on the wider needs of train operating companies placing orders and maintaining their existing fleets?

Malcolm Brown: I would argue no. There has been a boom. It can be evidenced by the number of train vehicles that have been bought over the last 10 years. I think there has been a bubble, if I am being very honest, in non-HS2 rolling stock. We have seen circa 8,000 new vehicles, of which 5,000 are net. That was all done pre-pandemic.

We ourselves have invested £1 billion in 665 vehicles for Greater Anglia, nowhere near HS2. They have successfully been delivered out of Alstom in Derby, so there has been a beat rate going on there. HS2 takes up a lot of oxygen and a lot of airtime, but quietly there has been other work going on.

David Clarke: In rolling stock terms, 54 trains is not insignificant, but compared to the rest of the network it is not dramatic. To illustrate the point that Malcolm was making, this is the last 10 years with, frankly, a significant boom in the number of new trains being introduced. It is obviously great for the passenger and for the train service that we offer, but it means that in the absence of a strategy a boom is being followed by a bust.

Greg Smith: Mr Crossfield, do you have any thoughts on that, or shall we move on?

Nick Crossfield: I share a little bit in Malcolm’s and David’s comments. It has been a fairly thick period, if I could call it that, for new rolling stock built. As David pointed out, there has been a boom. I take your point that it takes a lot of oxygen, and we need to take a more holistic and balanced view of the market. Certainly, in the last two or three months, HS2 has sucked a lot of oxygen out of the debate around where we should be investing our hard-earned cash in transportation infrastructure.

David makes a really valid point. This may be taken as a criticism, but it is not. For a variety of reasons, I don’t think we have been great at managing the long-term boom-bust cycle. We need to turn our attention to it now. HS2 will happen in one form or another. We should take it as read that it will happen and say, “Okay, when we get clarity we’ll do whatever they ask of us,” but I think the industry should park HS2 and concentrate on how we want to manage the industry structurally in its entirety—infrastructure and rolling stock—going forwards.

Q25            Greg Smith: That is very helpful; and leads me neatly to where I was going with the bulk of my questions. I fully accept that over the last 10 years a lot of operators have put new rolling stock on, be it from the launch of the Elizabeth line to the example that Mr Brown gave of Greater Anglia. There are a lot of railways that have an ageing fleet, as we have come out of the pandemic.

I give the example of the primary operator that serves my constituents, Chiltern Railways. They used to be a gold standard, and there are others like that, but now, certainly at rush hour and at weekends, they are a bit of a disaster zone, with major routes running only two-carriage trains and massive overcrowding. You only have to look at the Customers of Chiltern Railways Twitter feed—or the social media platform that used to be known as Twitter—to see people passing out and so on. How can the industry work better and in a more co-ordinated way to meet some of the challenges around operators that are now facing fleets that are essentially done and need wholesale renewal, but clearly wholesale renewal with the lead times is not going to happen overnight?

David Clarke: Chiltern is one of the prospective orders that the relevant train operator has put out to the market as a market-sounding exercise. You make a very good point about lead times, but in that market-sounding exercise they are asking for alternatives around refurbishment or new build. There is a lot of capability within the industry to address that. The issue is that that is by no means anywhere near a firm order. It is only a market-sounding exercise. It is not a tender. To look after your constituents and customers on Chiltern, we need to put that into the market as a tender. That will foreshorten the time that it takes to get the benefit to Chiltern customers. The same applies to Southeastern, TransPennine and the 1,600 very old diesels that are running round various parts of the country. As I said earlier, there is an opportunity to bring in a no-regrets order of battery trains, for instance.

We are being dangled a carrot of market sounding, but all of that takes time and money. It does not give any benefits either to the industry, in work to keep people employed, or to the travelling public, in refurbished or new trains. We encourage the Government to get on and accelerate from market sounding into tenders, and then into build.

Q26            Greg Smith: That is really clear. We can explore it in more detail in a couple of moments around the long-term fleet renewal for those railways that need to do that. I don’t think anybody doubts that there are a number of operators that need to do that. In the interim, is there a way that industry can flex a little bit not to permanently resolve but to ease some of the problems that operators like Chiltern are seeing right now?

David Clarke: That is a really good question, but you have probably got the wrong panellists here. As the supply chain, we will get behind the train operators and the infrastructure managers. Ultimately, it is for them on the frontline to address those issues. We will absolutely get behind them, but they need to bring us in and work with us so that we understand what they need in order to help.

Nick Crossfield: To add to what David said, I think there are two things, to answer your question. David mentioned this earlier. The decision to replace rolling stock is left too late, as in your example of Chiltern, with trains falling apart. Now they realise that they have to replace them. There is a valid point that they need to take a decision earlier. That means they need to look at the condition of the fleet.

That first point feeds into the second point. It almost suggests the need for a consolidated rolling stock strategy that sits above the current five-to-eight-year franchises that these train operators sit on. The rolling stock assets that we are talking about have a useful working life of between 25 and 40 years. That is typically a 30-plus year asset. A pandemic of 12 months is a mere blip in that time period—so do not pivot a long-term investment strategy on the basis of a 12-month pandemic. Because they have that length of lifecycle, they go way beyond the commitment that any operator has in the market today. An operator will have eight years or 10 years, and his or her decision making is based on what it takes to keep the franchise or, let’s say, extract the maximum value from the franchise over that time period, which might not necessarily be agitating to change rolling stock in the middle of the franchise.

The decision on rolling stock and what the future fleet park looks like, and its replenishment and replacement cycle, should sit above all of that. The DfT is a perfect body to do that. The other reason why it should sit at DfT goes to Malcolm’s point. It is a systems strategy. The type of rolling stock that you can have, and will be buying, is also determined by the type of infrastructure that you are going to have. Chiltern is a case in point. We need to invest in the Chiltern rail infrastructure to enable new vehicles to come on stream. There needs to be that kind of consistent, long-term investment view. It needs to be stable, and it needs to reside in an overarching body like the DfT.

Q27            Greg Smith: Looking through that lens, and going back to the points that were made earlier about long-term confidence for rolling stock orders, how big a challenge has it been that a new railway will launch at potentially the back end of next year, or more likely 2025, with borrowed rolling stock rather than new rolling stock? East West Rail is the one I am talking about, just for clarity.

Malcolm Brown: For long-term investment and our investment base, it is literally long term. As Nick explained, the pandemic is a blip. It is a tragic series of events, but in terms of the longevity of the investment profile it is, sadly, a blip. We need to get back into investing. There is now a pent-up demand to invest.

If we take your example of East West Rail, again we come back to the system question. East West Rail is a new railway, not electrified. What rolling stock should we be putting on there that will have a long-term future? It is not guaranteed, but it will be a long-term future. Should it be a combination of battery and discontinuous electrification? What combination should we do?

Is there an appetite to invest in that rolling stock? Absolutely—no question about it. Is there an appetite to actually invest in the infrastructure? Yes, there is. There is an opportunity, not just on new—East West is not all new—but on the existing railway now. There is an appetite to invest because it is seen as a long-term play.

Q28            Greg Smith: Mr Newlands is going to talk about decarbonisation in detailed questions later, but how big a barrier is the lack of available technology for the sort of longevity of stock that will need to be ordered for new railways like East West Rail, or indeed fleet renewal for Chiltern, whatever it might be? Nobody knows what is going to be the long-term right answer, be it battery, hydrogen, synthetics or a combination, whatever the answer is. Is that holding back orders? We have heard about a lot of examples of pent-up desire to spend, but real orders not being made. Is the uncertainty on what is the most stable and best green tech, to bring it down to its lowest common denominator, a barrier?

Malcolm Brown: I don’t believe it is. On behalf of my business, I will say that we would happily invest in a battery train. We are investing £2.2 million in Hitachi up at Newton Aycliffe to do a battery trial there. We need to get productionised units in. There is no point doing another test case on whether we can move a train with hydrogen: we know we can move a train with hydrogen. As Nick said, is hydrogen the best resource for everything? No, and that will not change, because it has certain characteristics and features. The sustainability blueprint, which has recently been published, says that you will use, as Nick said, horses for courses.

Let’s get on with it, and let’s get the productionised units out there, but also think of it as a system. If you go to battery, how are we going to charge it? Where are we going to charge it? How are we going to connect to the National Grid? Just now, there is a timeframe of about seven years, I believe, for certain parts to connect. There is no point having a battery train if we have nowhere to charge it. I’m not going to take a three-pin plug to the depot and shove it in. I need to think of the whole actual system, but the investment is there, and it is willing.

Greg Smith: I have an image of someone plugging a train into a three-pin plug at the station.

Malcolm Brown: It is safe to say that I am not an engineer.

David Clarke: One of the things that we lack in the industry is clarity about what will and will not be electrified. It is a well-proven technology. I mentioned earlier that we think the right answer is 60% or 70% of the network, but nobody can plan the railway as a system if they do not know, with a reasonable degree of confidence, which routes are going to be electrified by 2050. That is the first, real, key strategic need.

On your points about rolling stock, in our earlier report we postulated an approach that would bring out an opportunity to reduce the cost of running the railway. We have experienced boom and bust. In any industry, if you have a boom and bust of demand it tends to lead to inefficiency, and therefore higher cost. We postulated that if we had a smoother order book profile, you would see a reduction in cost. To prove to ourselves that you actually could have a smoother order book profile, we went through it and said, “Well, what would we do if we were the guiding mind?” What you do is take away a peak that would otherwise repeat itself in roughly a 35-year cycle. You look at that peak and bring some forward. They might be the diesels, for example, that you ultimately want to replace. You bring them forward and get benefits sooner, and you push some further back, maybe by some refurbishment. In that way you lop the peak, as they say.

We went through an exercise to prove to ourselves whether, if we were the guiding mind, that could be done and the answer is yes. My challenge is that, whatever the guiding mind is going to be in the future, that is their opportunity. I believe the Committee was told a few weeks ago by the Secretary of State that the Department were working on a road map for rolling stock procurement. We are waiting with bated breath to see what that might look like, but our model for what it would look like is something along the lines of what I have described. We would see not just individual train fleet replacement, because that will repeat the boom and bust, but a more holistic, strategic approach that tries to smooth things out.

Q29            Chair: We have talked almost exclusively this morning about the domestic market; to what extent is there an opportunity for manufacturing in the UK to export?

Nick Crossfield: We do it today. From Derby, we are producing monorail cars for Cairo in Egypt, a successful order which is just about to conclude. It is a beautiful product. We are supplying cars and technology to Latin America, again a monorail product. We do it today. In fact, the Cairo monorail order was the first export order in the UK rail industry for nearly 13 years. We have the capability to do it. You tend to find that internationally our reputation for railway engineering and the quality of the product is exceptionally good. The chances of supplying and selling our capability internationally in the rolling stock sector are relatively high.

Q30            Chair: Given that there is this lull in domestic orders, what more could be done to expand export opportunities, not just for yourself but for others?

Nick Crossfield: It is a good question, but a facility like the one that is currently in my business cannot survive entirely on export workload. It needs a level of domestic baseload demand to give it the economic characteristics to enable it to be successful in export markets. It is a large facility, and it needs a certain degree of domestic volume.

As part of conversations that are ongoing right now, we have looked at and tested the ability to bring international mandates from other sites abroad into the UK. Typically, it can be done. There are limitations to doing that. In certain cases some of the international orders are financed through respective countries’ export financing capabilities. They put covenants in the orders that they have to be produced in the country of origin, where the export financing is coming from, but there is nothing to prevent export order load from coming into the UK. In a facility, you need a mix of domestic and international volume.

Chair: David or Malcolm, do you have anything to add?

David Clarke: I want to bring out a slightly different point. We are internationally competitive in the rolling stock industry, because whenever a procurement comes out UK businesses compete with businesses internationally that would import. We must be internationally competitive by definition in that work is being brought to the UK. I think we can compete on the international stage. Export credit guarantees have a role. We have seen that helping in some infrastructure projects, where some of our infrastructure members are successfully exporting to high-speed projects in Turkey, for example.

A broader point is that, as a strategic industry, we are not asking for subsidy or anything of that sort. We are simply asking for projects to be put into the market that we can compete for. Those projects, whether they are exports or for the UK, are trains that are needed. It is really a question about timing. If the order is put into the market now, it helps the industry to survive. If it is put into the market in three years’ time, or even potentially 12 or 18 months’ time, it might be too late.

Q31            Jack Brereton: When Sir John Armitt gave evidence to us recently, he particularly emphasised that because of the lack of an integrated system there has been very much a focus on infrastructure solutions, which are often much more complicated and challenging to deliver, and not sufficient focus on solutions when it comes to rolling stock, timetable changes and staffing. Would you agree that there should be more focus on things like rolling stock when we are looking for solutions to increase capacity?

David Clarke: I think the simple answer is yes, but the railway is a system. It is quite a complicated system, and you have to consider it holistically. There is what you might call the hardware—infrastructure and trains—but there is also how you use it. It is about how you timetable it and what customer proposition you are offering. For instance, we are told that the industry is costing too much at the moment, yet we are not giving the train operators revenue incentive. That is a missed opportunity. The challenge is not just to zero in on one thing. As an industry, we need to run a good railway, and think about it holistically and as a system.

Q32            Jack Brereton: Nick, do you agree that there needs to be more focus on rolling stock solutions to address capacity issues and improve the railways?

Nick Crossfield: John is right in what he says. I think infrastructure dominates because it is where the big numbers are, and the immediate impact is in any kind of major project. You start with the infrastructure and therefore it has a high profile. Rolling stock comes afterwards and makes a bit of a late entrance to the party.

What John said and David has just said is exactly right. We have to be smarter about the decision making. Looking more closely at the rolling stock solutions that you want to deploy can save you an awful lot of complexity and cost on the infrastructure side of a major project. Infrastructure is hugely difficult to do, particularly in a country like the UK which is densely populated. We are trying to deliver major complex infrastructure in densely populated areas. You face planning complexity and sheer urban density, whereas a vehicle solution is a slicker and easier way of doing it in certain cases, but not in all cases.

Q33            Jack Brereton: Malcolm, I want to ask a separate question about the renewals programme. You have already mentioned the Pendolino refurbishment.; there have been some concerns about the standard of that work. On some of the trains I have been on, armrests are already worn, and it is only a maximum of 12 months since the fleet was refurbished. Are there concerns about the standard of some of the work that was undertaken on that rolling stock?

Malcolm Brown: Not that I am aware of, but I will take it away and look at the point about the armrests. It was £125 million. We are just coming to the end of it. It was based up in Widnes. It created a whole batch of new jobs. We used some innovative materials. I think the tables are made from recycled plastic bottles. We were trying to do the right thing.

The actual refurbishment itself has won countless awards. Avanti is getting incredibly positive customer feedback. If there is an issue, we will change the armrests. We can do that. The overall refurb seems to have gone incredibly well. That is part of the market, and Nick touched on it at the beginning, where there is a whole swathe of work going on in Doncaster and Wolverton, which is part of the supply chain. It is very often unseen and unheard. It relies on the lifecycle of trains. Coming to the green agenda, that carbon has been sunk. Refurbishing a train is actually a very green way of improving the rolling stock. I will certainly take away the armrest question.

Q34            Jack Brereton: That would be very useful. What is the expected lifecycle of that rolling stock now that it has been refurbished? How many years will it be until you have to look at it again?

Malcolm Brown: The initial Pendolino trains are just short of 20 years, but we have trains that are actually only 10 years old. We have just done a study on that rolling stock. They can run for another 20 years as new. It will not need another major refurbishment, but we will continue to refurb as it goes. Most rolling stock in the UK has to have a refurbishment part-way through its life. That is just natural and how it works. It can be extended to 30 or 35 years, and sometimes beyond that.

Q35            Grahame Morris: Good morning, gentlemen. I have a number of questions for Mr Brown regarding the rolling stock strategy steering group, which I believe you chaired.

Malcolm Brown: I did.

Grahame Morris: I want to come back on some of the previous points. Mr Crossfield mentioned that the HS2 debates sucked the oxygen out of the room. Your stark warning about the 3,000 job losses and the 15,000 in the supply chain certainly took the wind out of my sails. Can I reassure you and the other manufacturers that this Committee has pursued these issues, with both the Secretary of State and the Rail Minister, in earlier sessions? I did not get the impression from the responses from Ministers that there was this level of urgency. I can certainly speak for this side of the Committee to say that we would very much value the opportunity to come to Alstom and see the vertically integrated facility, either with the Committee or separately.

Nick Crossfield: You would be most welcome.

Grahame Morris: You mentioned that if the supply chain goes and those highly skilled engineers lose their jobs, we will never get it back. Can I echo that? I represent an area in the north-east where the main industry was coal mining. When a previous Conservative Government accelerated the pit closure programme in the 1980s and 1990s, the supply chain based in the Team Valley, Hugh Wood in Bowes that manufactured hydraulic pit props, continuous miners, mining machinery, electrical panels and so on, had quite a good export market supplying China and a number of emerging markets. When they didn’t have the basic market from UK coal they went, so we lost 20,000 or 30,000 jobs in the supply chain. I understand exactly the point that you are making there. I just hope that is not lost on Ministers.

I come back to an answer that Mr Clarke gave us about the age of the rolling stock. I think I asked the Rail Minister how old the rolling stock was. He said that the average age was about 16.5 years. That seems to be in conflict with the answer that you gave us, with a number of trains being maybe 35 years old. Are both of those answers right?

David Clarke: It is consistent. There are a lot of relatively young trains because of the boom in orders over the last 10 years. As Malcolm said, about 8,000 vehicles have been replaced. Broadly, the main line is about 16,000 vehicles, so roughly half of the fleet was replaced in less than 10 years. That would mean you would be unlikely to replace the other half in the coming years, which is why we end up in a potential quiet period, if not a bust.

On the 35 years, what I was talking about was that if you assume that a train from birth to the scrapyard might typically be about 35 years, from the historic graph you can plot forward by looking at every train, date of birth to date of death 35 years hence. That was how we established what the future profile would look like if you did not take any action. Obviously, the future profile looks like the old profile because it is just a complete repeat. We think that would be very foolhardy because it would just result in a repeat of the troughs as well as the busts. That is not the way to run an efficient production industry. These are factories producing very complex, sophisticated machines. On your point about the Team Valley, they could not hang around waiting for the next big order, whether it was coming internationally or not.

The Minister is right that the average age is about 16 years, but the expected life of a train will vary between maybe 30 and 40 years. We picked 35, as you have to make an assumption somewhere.

Q36            Grahame Morris: Can you just repeat the figure you gave earlier about the number of trains that are within five years of being 35 years old? You quoted a figure earlier, didn’t you?

David Clarke: Yes. There are 2,600 trains that will be 35 years old by 2030, which is only seven years away. If you think about the procurement times, if you are going to replace those 2,600 by 2030, you need to start now. Why wouldn’t you start now, because that would put some work into the facilities in the UK, whether new build or refurb?

Grahame Morris: That is a great piece of evidence.

David Clarke: Thank you. I’m sorry if I made it confusing earlier.

Q37            Grahame Morris: That brings me to Mr Brown and the rolling stock strategy steering group. We clearly need a plan. We need a long-sighted plan to address the points about peaks and troughs in production. When the group last reported, it produced a strategy document in 2018. Have the projections, suggestions and proposals in that document been honoured or implemented?

Malcolm Brown: Forgive me if I am covering old ground. We set up the long-term rolling stock strategic group, which was a cross-industry group made up of owning groups, manufacturers and ROSCOs, and including the DfT, back in 2012. What we did was to look at the national fleet of passenger rolling stock in the UK, literally by individual train. We projected forward, partly on what David was saying about its current age and when it would hit 35 years. We then overlaid compound annual growth of circa 2%. That was actually less than we were achieving at the time. That is passenger numbers.

That basically gave us a spreadsheet that said, “If we continue to grow passenger numbers in this manner, we end up at a fleet size, based on the current load factors, of x.” In that fleet size, we know that periodically we will have certain trains that will hit the 35-year threshold. At that point we assume that the trains will be replaced. From that, we got a beat rate of how many new trains the UK would require and roughly at what period. We then reiterated that about three times over 2014, 2016 and 2018. What we discovered was that the predictions we made in 2012 were absolutely consistent. We took it to 2018. We were then going to run it again in 2020.

Q38            Grahame Morris: Why didn’t it continue? It seems sensible to have a long-term strategy.

Malcolm Brown: We took a pause in 2020 because of the pandemic. We then had passenger numbers drop off. What we are now waiting for, or what has held us back up to this point, is an understanding of where passenger numbers are. I must stress that we need to think this way. We need to think about what the passenger and the industry needs. The RSSG is not a manufacturing plan. We should be responding and manufacturing to what the passenger needs are.

We have gone through 2020, 2021 and 2022 and we have seen passenger numbers come up. We probably have a steady beat rate, although maybe not where we want it to be in terms of passenger volumes. We should be able to do the maths and take it forward from there. We can factor in the 8,000 new trains that have come into the mix as well.

Q39            Grahame Morris: I know that my colleagues are going to raise questions with you about recent developments. Is this ongoing, or was it just suspended because of the pandemic?

Malcolm Brown: Yes. The data is there. We clearly need to update it, but it currently resides with the Rail Delivery Group. The reason it resides there is that we needed, and I wanted, an independent home for it. There is quite a lot of data and information that we collated, and that is why it sits there.

Q40            Grahame Morris: I understand that you have to factor in changes in passenger demand, and there was a huge impact from the pandemic. I understand that the east coast main line has recovered to more than 100%, or so I am told. However, even allowing for fluctuations in passenger numbers, there is still the ongoing issue that Mr Clarke identified about the age of the rolling stock, which would still be a factor. That’s not variable; it is completely predictable, isn’t it?

Malcolm Brown: That is in there as one of the factors. If I simply re-ran the model and assumed 2% passenger growth based on pre-covid levels, I would get the wrong answer. It is simplifying the model incredibly, but I have to take the current passenger levels. We do it on a route-by-route basis—we do not do it on a TOC basis—then we see what the predicted future growth for it is. The age of trains is fixed; that has not changed.

Q41            Grahame Morris: Are we concerned that Ministers will use that as an excuse that the steering group has not made any recommendations?

Malcolm Brown: The steering group works independently of Ministers. It is by the industry for the industry. Ministers and Government are aware that DfT participates in it, but it sits with us.

Grahame Morris: Thanks, Chair. I am conscious of the time.

Q42            Chair: Before I turn to Fabian, I would like to ask one supplementary question. As you are pausing and doing some work as to where the future demand will be, to what extent are you looking at the types of passengers who are increasingly going to use it and what their wishes are? If I can make my own hobby-horse pet plea, will you look at the customer experience? There are three basic requirements: a seat that has decent padding; one with decent legroom; and one that is aligned with the window so that we are not looking at a plastic pillar. How are you looking at what changes the customer needs?

Malcolm Brown: That is quite a critical point. Going back to a previous question, that is one of the factors that has changed. East Coast, LNER, Lumo and Hull Trains are doing incredibly well, but the nature of the passenger has changed significantly. It has moved to leisure. That has an economic impact, as the Committee is well aware, on the yield and how much we get from each individual passenger. On average, it has dropped significantly. All of those factors are in the mix as well.

To go back to your specific point, let’s create an environment that not just satisfies passengers—we should do that—but attracts passengers back. Going to the green point—the sustainability point—the best way to decarbonise transport in the UK is modal shift. Get people out of cars and on to trains. That is the best way to do it, even it is a diesel train. It is still more sustainable having people on a diesel train.

Chair, I take your point about looking at the interior and how it works. I am sure you will agree that the refurb on the Pendolino has gone a long way towards that. Despite the comment about armrests, the actual seat quality on the refurbished Pendolino, which is a completely new design, is excellent. It is very good, and we are getting a lot of positive feedback because it’s comfortable. Who knew?

Chair: Indeed. I couldn’t agree more.

Q43            Fabian Hamilton: Following on from your point about passenger experience, I use the train every week from Leeds, but I use my bicycle to get to the station, put it on the train and take it off at King’s Cross. That is a very poor experience right now. I just leave that with you because my main question doesn’t refer to that, but it is a bit of an obsession with me. Cycle-rail integration is non-existent in this country, I’m afraid.

Mr Clarke, is it clear who is currently in charge of rolling stock strategy? I know that you have tried to answer this throughout the session, but what is your view?

David Clarke: By default it is the Department for Transport through train operators. The train operators issue an inquiry, but they cannot do anything without having the Department for Transport support them in that. It comes back to the Department, and that is relatively new, post pandemic. Pre-pandemic, typically the boom that we have talked about was driven by franchisees, when bidding, choosing to buy new trains as a way of making an attractive offer, both to the Government and to their customers. Pre-pandemic, it was the TOCs that were leading, and now it is the DfT leading because of the nature of the contract between them and the TOCs.

The issue is that that is relatively new territory for the DfT, so I am not sure that they have the processes in place. As we have already said, they don’t really have the strategy in place, although we wait with bated breath to see what will appear by the end of the year.

Q44            Fabian Hamilton: The Secretary of State told us that he planned “by the end of the year” to publish a “road map for procurement”. We have not seen it yet. What form do you expect it to take?

David Clarke: This would be speculation, but I imagine it will lay out the orders that they expect to bring to the market. I imagine they are the ones that are already in market testing—the ones we have talked about—so Southeastern, Chiltern, TransPennine, and so on. I would be pleasantly surprised if it dealt with things like the 1,600 diesels I mentioned, and if it had an invitation to replace those with battery-electric or low-carbon vehicles.

What I think it will do—I remain to be proven wrong—is to look at it in individual procurements for individual fleets. As I mentioned earlier, I think we need a more holistic look if we are going to smooth out the order book. Fair play if they come out with what I have described and move it rapidly to procurement. It would not eliminate the problem that we have at the moment. It would certainly help, but it would be missing the opportunity to have a long-term strategy that smoothed the order book profile and, through that, gave more security and more confidence to all of the manufacturers and refurbishers in the country, and reduced costs.

Q45            Fabian Hamilton: You have more or less answered my next question, which is: what conversations have you had with the Department for Transport on the so-called road map? Perhaps we should call it a rail map.

David Clarke: We have been in correspondence with the Department since we wrote the report, but we have not had any engagement over the road map or, as you quite rightly put it, rail map. We have not had any engagement on that as yet.

Q46            Fabian Hamilton: Can I broaden this a bit and ask other members of the panel what your understanding is of the role that Great British Railways will play in the formation of rolling stock strategy, if and when it happens?

David Clarke: I can give a quick answer to that. I hope that they would be the guiding mind that we talk about, and that in their role they would take a long-term holistic view of what is needed to run the railway. They should have a duty to have a mind to the sustainability of the supply chain, which is something that we have called for. Historically, that has not been a consideration in strategies on procurement. For instance, in rolling stock terms it is, “When do I need a new fleet?” Because, historically, we have had boom and bust, if you do it that way you will continue to boom and bust.

Q47            Fabian Hamilton: Have any of you, collectively or individually, had conversations with the transition team at Great British Railways?

Malcolm Brown: Yes, I have extensive conversations with the transition team. We actually seconded one of our senior managers to the transition team specifically to work in the rolling stock area, for obvious reasons. I don’t know specifically what he was doing for a period of time but, yes, we have had them.

To go back to your original question, there is a view universally, whether you call it GBR or otherwise, that the industry needs a guiding mind that is arm’s length and sets strategic long-term direction—not day to day, not short term and not mid-term—that then allows the industry to actually get on and deliver.

I do not agree that the guiding mind should be programming which trains are made when. I think the guiding mind should be taking information, such as the long-term rolling stock strategy, and saying, “This is what we see as a predictable future.” It should be at that level, not down in the weeds, and setting out a view of the whole system and its infrastructure, and how you interconnect with car transport, bikes, and so on, rather than being incredibly myopic. People tend to drift into the detail because, of course, that is what they can be certain of. We need it to be at a higher level.

Q48            Fabian Hamilton: Thank you for mentioning cycling. I will conclude with one very brief question on decarbonisation. Mr Crossfield, in your opening remarks you said that there was a high potential for 2027 and 2028 onwards. You have mentioned that again. You said that we are “way off pace in terms of decarbonisation”. In your view, do you think that the UK is behind other countries in decarbonising the train fleet? You more or less said that, but can you elaborate?

Nick Crossfield: Yes, because as part of an international group I see what we are doing in Germany, Benelux and Italy. In Germany, we have hydrogen fleets in passenger service. In Italy we have just signed a first contract, so the trains are being built. Benelux have ordered the first set of hybrid battery-electric trains, together with hydrogen capability. We have market soundings in Austria and Scandinavia.

An important point is that it is not just about rolling stock. The conversations in those countries are not just around rolling stock. We find ourselves intimately in the middle of a conversation about the system, because there are infrastructure providers in those conversations, as well as vehicle manufacturers. At the moment, while the technology is being developed and introduced, and there is an introductory cost perspective to the first fleets to be deployed, you invariably have a Government sitting behind it as the ultimate financial stakeholder. The Governments in those countries play a very active role in trying to stimulate the market for those products.

We have had those conversations here in the UK with the DfT. Again, it is not us saying, “You need to put money on the table.” You need to create the market demand and the market pull. If you create that market pull, that technology will come. People will invest. Say the DfT is putting out a franchise for competitive tender; you would expect the DfT to say, “I want a proportion of that fleet to be carbon zero.” If they specify that “We will not buy a fleet unless 30% of it is carbon neutral,” the investment will follow.

Fabian Hamilton: Thank you; that is very clear.

Q49            Gavin Newlands: I will be digging into decarbonisation in a lot more detail, but I want to follow on from the last question from Mr Hamilton. Rolling stock and infrastructure are very much two sides of the same coin in decarbonising. If we look at the devolved Administrations—I am not necessarily just talking about Scotland here, but any devolved Administration that has responsibility—and look at both sides of that particular coin, what different approaches have the devolved Administrations taken to both rolling stock procurement and infrastructure, and has an overarching strategy driven that? Mr Brown referred earlier to the lack of an overarching strategy at the moment from a UK perspective.

Malcolm Brown: The obvious one is Scotland. Transport Scotland, with Network Rail—we shouldn’t forget that they are a participant in this—has been implementing a programme of electrification throughout the central belt of Scotland. At face value, that appears to have gone well. The figures that are in the public domain seem to suggest that the single-track kilometre cost of that has been extremely economical.

It is not like for like because things like bridges and tunnels put cost into it. However, that is not to say that south of the border there isn’t electrification. You often hear that there is no electrification plan. The TransPennine route upgrade, going through Leeds, is 70 miles of work that is ongoing at this point in time and is being invested in. We are then looking to invest in rolling stock, which is part of the TransPennine new fleet that is coming out, that will serve that.

What would be good is to understand that that programme is going to continue and that there is going to be further electrification. Again, we do not have to go into the detail of its being here, here and here, but to understand that for the next period of time we will have a workforce that is investing in civil engineering and has a programme where the knowledge base is baked in and where we can actually see careers for individuals and the skills running all the way through. Then we can introduce the rolling stock that fits in that system.

One of the concepts that Scotland has, and we are introducing here, is the concept of discontinuous electrification. Tunnels are expensive to electrify. Can we have rolling stock that allows you to run under the overhead lines and then switch to a battery when you need to go through a tunnel? You would save costs on that. Yes, your train is a bit more costly because you are carrying and using a battery, but in the whole system it is a lot more cost-effective.

Q50            Gavin Newlands: It is about looking at it in a holistic or complementary approach. I think Levenmouth is a line looking at the model you are suggesting. In the last month the Barrhead to Glasgow line tested its first electric train along the new stretch that has just been electrified.

Previously, the rolling stock strategy group said that the English Government—a term I am quite happy to formalise and make permanent, Chair—expressed reduced ambition in its network electrification programme. Is that still the case? Is it still fragmented? Do you see light at the end of the tunnel, if you pardon the pun?

Malcolm Brown: There is more work going on now in electrification that should be given credit. I have talked about the TransPennine route upgrade; that is a difficult one to do. On the midland main line we are doing it in sections. We have ongoing work in Scotland. We are talking about the Core Valley in Wales, so there is quite a lot of electrification going on. We will not electrify the whole route. I know that you are not suggesting that for a second, but there are parts of the national route that we should not electrify because it is not economical or sensible. Going back to Nick Crossfield’s point, those are the places where we use battery and hydrogen to service those parts.

Q51            Gavin Newlands: Mr Clarke, what advantages and disadvantages do you think there are to the approaches we have seen? Obviously, there is the Scottish example that Mr Brown has referenced and the UK example at the moment. You referenced an order, in relation to the Scottish approach, that Scotrail has at the moment, although behind other operators. They have a strategy to replace two thirds of their fleet by 2035, so essentially they will fully decarbonise their fleet by 2035. That is a difficult and stretched target; one could argue that it is still a target and an ambition, none the less. What do you see as the benefits and disbenefits of those different approaches?

David Clarke: The great benefit that we see from Transport Scotland is that they are clear about what they want to do, whether it is with electrification or with rolling stock. That clarity is really helpful to the market because we know what to think about. We know what plans to develop to get ready for when they come to market. Of course, as you know only too well, Scotland has the same fiscal challenges as anywhere else in the UK, and therefore there is a question about when it will be able to come to market. Positively, we understand that Transport Scotland will be in the market with a rolling stock proposal in the new year. If that comes true, it will be very positive.

Transport for Wales are reasonably clear about what they want to do. In their investment programme and with their rolling stock fleet, they have focused, where they can, on reducing carbon.

Q52            Gavin Newlands: The RIA said that the 2040 target should be replaced with an ambition to maximise the target and to remove all diesel-only trains by 2040. I should clarify that the ambition is to maximise the cumulative reduction of carbon. Why?

David Clarke: I am glad you have asked me about that. Let me try to explain. The problem with a fixed date is that it potentially causes suboptimal behaviour. You have to get rid of something that would notionally last until 2043. In the automotive world we are told that if you don’t do very many miles you should not go out and buy an electric car. You should run your existing car into the ground and then buy an electric car.

We are therefore talking about maximising cumulative carbon. In simple terms, if we save a tonne of carbon today, we have saved 27 tonnes by the time we get to 2050. If we only start worrying about it in 2040 or 2039, we are going to save 10 tonnes. We are, for example, calling for a no-regrets order of battery trains because we see them as always having a future. We see them being fundable and financeable. They are a similar cost to diesel trains. We know that however much electrification we aspire to do, there will always be at least a third of the network that is not going to be electrified. Why not buy those today? The trains they would replace are very old and you would get the passenger benefits, the carbon benefits and air-quality benefits right now, whereas the rule would say not to replace them until 2040. We think that is therefore a false target.

Q53            Gavin Newlands: Creating tough targets for certain dates can create tough headlines for politicians as well. Mr Crossfield, I have asked your colleagues on the panel this. Would you say that GBR should be looking at the approach of the Scottish Government? Part of the formation of GBR is to ape, to some degree, the situation we have in Scotland in the ScotRail line or whatever its name is—they have changed the name, and I always forget it, but they are working together on track and train, essentially. In terms of the questions I have asked, should GBR be looking at this approach with a more strategic outlook?

Nick Crossfield: I agree with Malcolm’s comments earlier. GB Rail should be the strategic authority that sets the direction. Medium to long-term directional thinking would then create a framework into which investment decisions could be distributed. We have had bodies like that before in England—we had the Strategic Rail Authority. We have taken 15 years to go round the same circle again, but that is another discussion.

The Scottish model, for somebody who is actively tracking that market and is an interested party in that rolling stock, is very attractive. We are having a single, holistic conversation with a body that has complete ability over infrastructure and fleet. It is great to have that conversation. There is an example in my business of a rolling stock order that we are delivering today that is very similar. In Ireland, in Dublin, we have a 10-year framework to deliver a battery-electric hybrid commuter train because only part of the network is electrified. To Malcolm’s point, it is not economic to electrify all of the network. The train has the capability to run under the wires and then charge the battery, drop out of the wires and do the final bit on batteries.

In that kind of technology, the degree of integration between infrastructure provider and train operator needs to be complete. We have that in Ireland, similar to what you will have in Scotland. In Ireland, we have a customer who is responsible for the procurement of the train, the operation of the train and the delivery of the infrastructure. It is a great project because it is streamlined decision making and continuous decision making. The project is managed as a system, as a whole. In certain mandates in mainland England, we do not get that.

Q54            Gavin Newlands: I am very conscious of the time, so I will combine a question and ask you all for a quick answer. In 2020, Network Rail published a traction decarbonisation network strategy document. Obviously, there have been a lot of different strategies discussed this morning. How influential has that strategy been in the UK Government’s approach? If there is anything beyond what you have already said, if you were advising the Minister or the Secretary of State today, what steps would you take to speed up the decarbonisation of both rolling stock and infrastructure? I will start with you, Mr Crossfield.

Nick Crossfield: I am aware of the document that was done some time ago. Has it made it to the surface? Is it having a material impact on the kind of dialogues that I am in? No—simple answer. What do I think the Government should do? I think the Government should do as I suggested earlier. When we are looking at future franchises and future fleet replacement strategy, we should be mandating that a proportion of that fleet needs to be carbon zero.

Gavin Newlands: Thank you for the quick answer. Mr Clarke?

David Clarke: I think the TDNS frightened the Treasury by the price tag that it had attached to it. We know more now, but unfortunately it probably asked for too much electrification. Several years on, we now have more confidence in what battery trains can do. One of the reasons it had a particularly high mileage was that freight trains were perceived to need wires. Actually, there has been a piece of work done by the Chartered Institute of Logistics and Transport which says that if you wire some core routes in the UK, you can get 90% of the freight under the wires. I think that is the figure. Those would be the same sort of core routes that you would wire for passengers. That would be in our 60% or 70% that I mentioned earlier. For the freight trains that run on the bit that you have not wired, HVO is a perfectly plausible solution because it is only 5% or 10% of total freight. I think TDNS overcooked it. The answer can be lower and therefore more affordable.

Gavin Newlands: Mr Brown?

Malcolm Brown: Continue with the programme of electrification. As Nick says, get on and order some productionised battery hybrid trains, and continue to refurbish the environmentally friendly trains that we have at this point.

Q55            Jack Brereton: I have a quick question, Chair, that follows on from what my colleague Gavin Newlands was asking about rolling stock. I particularly want to ask about CrossCountry because there do not seem to be any plans for what to do with the rolling stock on that route. Obviously, a lot of the route operates under the wires. About half of the route is electrified. Why are there no plans coming forward for bimodal rolling stock on that route?

David Clarke: I think you have answered the question. That is the logical conclusion but, as we said earlier, there is not a map that says what we might electrify by 2050. There is no rolling stock strategy. You need to bring those two things together. The CrossCountry franchise has recently been extended. That was possibly a missed opportunity to specify exactly what you said.

Q56            Jack Brereton: There are no plans; as you said, it has just been reissued but there are no plans to actually address the issue.

Nick Crossfield: It is not completely missed because in the conversations we have been having about some of the immediate refurbishment opportunities, there has been a specific conversation about that fleet. There is an opportunity to re-traction that fleet and extend its life.

Q57            Jack Brereton: Is there still an option to convert it into bimodal?

Nick Crossfield: It is a discussion that is out there, and we have positioned it.

Q58            Chair: I want to conclude the session by touching on one final area. You may be aware that the Committee has been doing a fairly major inquiry on accessibility in transport. I would like to get your thoughts on what work is being done, and could be done, whether it is looking at new procurement of fleets or refurbishment of existing ones. How can we improve the physical accessibility of our rolling stock for disabled passengers?

Nick Crossfield: Level boarding. You are right that it is a very big priority going forward. For example, in the fleet developments that we are carrying out—the next generation of fleet—we are moving towards a consistent solution across all of our fleets for level boarding. For example, if you look, say, at a mandate like Southeastern, we anticipate that when it comes to market, accessibility will be a very big part of the procurement process.

David Clarke: Very quickly, there is a lot that trains can do to improve accessibility but, as we have said ad infinitum, the railway is a system, so you also have to deal with the infrastructure at the same time.

Chair: Malcolm, any thoughts?

Malcolm Brown: Happily, and let’s not take it away from the new trains, a lot of the refurbishments that have gone on with the existing rolling stock have gone a long way to address the issue of accessibility and long may that continue, but it is not perfect and we are not there yet.

Chair: Thank you very much. This has been an incredibly informative session. On behalf of my colleagues, I am very grateful for your time and opinions this morning. Thank you again.