Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence

Memorandum by the Strategic Rail Authority (P 37)



  The Strategic Rail Authority was established by the government with purposes set out in Section 1 of the Transport Act of 2000 as follows:

    —  To promote the use of the railway network for the carriage of passengers and goods.

    —  To secure the development of the railway network.

    —  To contribute to the development of an integrated system of transport of passengers and goods.

  In recognition of the statutory purpose to promote the use of the railway network for the carriage of goods and to achieve the objective laid upon us of growing railfreight by 80 per cent by the year 2010, the SRA established a dedicated freight team. That team has laid out its strategy which is designed to support growth through network and access investment and targeted revenue support. The intention is to create a framework in which pathways for freight trains that meet customers' requirements, in terms of speed and reliability, are provided when and where they are required for efficient operators who form an integral part of a competitive supply chain, together with the requisite interchange facilities to enable transfer between road and rail.

  The structure of the railfreight industry, established on privatisation, is different from the passenger sector. British Rail's freight activities were sold outright to private purchasers with five of the six businesses sold, ultimately, to English Welsh and Scottish Railways (EWS), a subsidiary of Wisconsin Central Transportation Inc. of the USA. This company now moves around 90 per cent of those goods moved by rail in the UK and also operates trains through the Channel Tunnel. In 2000, 2.94 million tonnes of freight was conveyed on through freight trains via the Tunnel. The sixth business, Freightliner, went to a management buy-out team backed by venture capitalists. This company specialises in the movement of maritime containers but has recently moved into other freight traffic areas as well. In addition there are other small operators who are operating in the railfreight market and a key part of the SRA's freight strategy is to encourage on-rail competition.

  There are five strands to the SRA's freight strategy which are interlinked and designed to create the right conditions to enable growth to take place:

    —  Network: The objective is to identify capacity and capability issues with a view to targeting investment in railway infrastructure to meet future demand. In particular, the aim is to ensure that ports are provided with links of adequate gauge and capacity.

    —  Interchanges: It is acknowledged that the majority of railfreight growth in the general freight market will inevitably come from customers who are not linked to the rail network at the moment. The interchange strategy seeks to create a framework within which an appropriate network of interchanges can be provided.

    —  Performance: Whilst the SRA has limited influence as far as the quality of service is concerned, we can ensure that new standards for speed, reliability, competitiveness and flexibility are achieved by encouraging competition and innovation and putting in place the right network to improve reliability.

    —  International: The SRA has a specific responsibility to develop international freight. The same factors that impact on freight generally apply, but there are additional, specific, challenges associated with developing competitive, high quality international services.

    —  Funding: The aim is to develop a framework for the application of funds delivering the best value for money for the taxpayer. There are five aspects to the funding strategy:

      —  company-neutral revenue support which focuses financial assistance on classes of traffic rather than individual companies (described more fully later);

      —  a continuation of support for specific companies under a re-launched regime of freight facilities grant and track access grants;

      —  financial support for interchange developments;

      —  funding to encourage innovation;

      —  network investment.


  As globalisation becomes a more prominent feature of trade and products are sourced from the other side of the world as readily as from local manufacturers, ports play an increasingly important role in the supply chain. Global logistics are very much a reality and it is vital, therefore, that the ports themselves are provided with efficient and cost-effective transport links to the market.

  A key part of the SRA's freight strategy is concerned with the movement of freight to and from ports and as the economy grows, this traffic inevitably assumes an increasing degree of importance. In order to achieve the government's freight modal shift, as outlined in the 10 year plan, it is vital that an increasing percentage of this business is moved by rail. It is necessary, therefore, that appropriate and adequate links are provided.

  We have identified the following and addressed the issues in our strategy:

(1)  Container traffic

  Rapid growth in container traffic very much reflects the globalisation of logistics. Between 1993 and 1999 container traffic handled by UK ports increased by 43 per cent to the total of 6.7 million TEUs. The deep-sea ports of Thamesport, Felixstowe, Southampton and Tilbury accounted for two thirds of these movements. All of these ports are rail-served and the following percentage of containers currently move by train:

    Southampton, 30 per cent—(equating to 22 trains per day)

    Thamesport, 15 per cent—(equating to 6 trains per day)

    Felixstowe, 20 to 25 per cent—(equating to 26 trains per day)

    Tilbury, 25 per cent—(equating to 10 trains per day)

  In order to increase the rail-borne proportion and to cater for growth from these ports we have explored and will be addressing through network investment, the issue of capacity on routes between these locations and the inland terminals that they serve. Furthermore, the question of loading gauge has been recognised. At present some 19 per cent of containers in service are 9'6" tall but this proportion is increasing as new boxes are built to this height and not 8'6", the previous standard. The concensus of opinion is that by 2020 over 90 per cent of containers will be 9'6" in height. On rail routes to and from the ports, all of which are loading gauge-constrained, these taller boxes can only be carried on special well wagons which has the effect of reducing the total number of containers per train and increasing the cost, thereby reducing rail's competitiveness with road haulage. Road hauliers can carry either type of container on the same lorries within the 16'6" main route height limit in the UK.

  The SRA has commissioned studies into the capacity and gauge constraints on the Felixstowe to Nuneaton (for access to the West Coast Main Line) route and on that from Southampton to the Midlands, again connecting with the West Coast Main Line, which is itself the subject of a major upgrade. The aim is to identify the scale and cost of the work required to accommodate the levels of traffic foreseen. This will then be compared with the benefits accruing from movement by rail to assess the degree of value for money achieved by such investments.

  Port capacity in the South East is approximately 5.2 million TEUs per year, with the current market being some 4.8 million TEUs. It is anticipated that the market will grow by some 30 to 50 per cent by 2010 (cf of the 42 per cent growth between 1990 and 2000) to somewhere between 6.2 and 7.2 million TEUs per year. With these growth predictions there will be a capacity shortfall of between one and two million TEUs per annum by 2010. A number of schemes is currently being considered to address the future capacity problem; these are as follow:

(a)  Dibden Bay, on Southampton Water

  This proposal, by ABP, will create a new terminal capable of handling around 2.3 million TEUs per annum supplementing the existing port of Southampton which has a current capacity of 1.5 million TEUs per year and is expected to run out of capacity in 2005. At present about 11 container trains per day operate into and out of Southampton; Dibden Bay would generate an additional 20 to 25 trains per day each way. This has significant implications for the route to Reading and the West Midlands and this potential demand has been factored into the study currently being undertaken into capacity and gauge on that route.

(b)  Bathside Bay, Harwich

  Hutchison Whampoa are proposing a development at Bathside Bay following their acquisition of the port of Harwich, which will have the capacity to handle around 1.4 million TEUs annually, requiring an additional eight trains per day to or from the East Coast Main Line or West Coast Main Line. This demand will be considered in the SRA's studies on the Felixstowe to Nuneaton route, the cross-London routes and has implications for the gauge-restricted tunnel at Ipswich.

(c)  Shellhaven

  This project, a joint venture between Shell, the Port of London Authority and P&O proposes a new container facility on the Thames estuary between Tilbury and Southend. It is estimated that by 2015 annual throughput will have reached 4 million TEUs annually requiring around 30 train paths per day each way via North London or via Ipswich and the Felixstowe to Nuneaton line. Again, this has been factored into the studies previously mentioned and also the London freight routeing study.

(d)  Thamesport

  At Thamesport a small-scale scheme is in the process of being planned, with a view to completion by November 2001 which will provide additional and operational flexibility in the medium term with a view to more extensive investment within the next five years.

  Ports are commercially funded and there is in operation an "open port" policy where shipping customers are free to choose the port of loading and unloading. Nonetheless, there is general concensus on the likely traffic growth levels and a recognition that it is in the public interest that as much of this as possible should be moved by rail. Indeed, such traffic forms an integral part of the SRA's 80 per cent growth objective and is a major target, reflected by our choice of the maritime container business to be selected as the first to benefit from the forthcoming implementation of the company-neutral revenue support scheme, which is described more fully below. This is designed to encourage competition and to grow rail's market share. For rail to play this role, significant investment will be required in network enhancement projects, in terminal facilities and in port facilities. In order to attract public funding, these must be accomplished within the overall ceiling of the environmental benefits gained by the removal of lorry journeys—the "Sensitive Lorry Miles" approach, used to justify Freight Facilities Grants and Track Access Grants. If, for any reason, rail is not able to achieve the levels of traffic for the increased volumes of business, then the containers will need to be moved by road with implications for investment in the UK's road network.

  Ultimately the choice of port for container vessels will be dependent on maritime considerations, primarily draft available and on the ability of shoreside equipment, notably cranes, to ensure the minimum dwell time in port for the ship. "Post Panamax" vessels carrying 8,000 containers with 22 abreast are likely to be in operation in the foreseeable future and it is possible that ships with capacities of more than twice this figure will be operated in the future.

  Currently, the majority of maritime containers that travel by rail are moved by Freightliner. On privatisation a deal was struck for the company to receive revenue support. This deal ceases in May 2001 and a "rollover" grant has been negotiated to support the company's container operations after that date to bridge the gap until introduction of the new company-neutral subsidy scheme. This new proposition is in line with the SRA's desire to encourage competition in the railfreight sector and is based on the principal of publishing a matrix of destinations against grant per unit of movement in order that any operator can bid for the traffic concerned. Consultants are currently working up the scheme and it is proposed that, after ratification by the EU Commission (in order to ensure compliance with state aid regulations), it will be in place in early 2002. It is proposed that the first business sector to benefit from the new scheme will be that of maritime containers, with a view to extension to other areas subsequently.

(2)  Other Intermodal Traffic: Swap-bodies and semi-trailers

  The majority of other intermodal business is conveyed by lorry which crosses the Channel by Eurotunnel HGV shuttle or by ferry. In 1999 some 5.3 million HGVs were handled by UK ports or the Tunnel (including Irish Sea Traffic) conveying some 69 million tonnes of cargo.

  It is probably unrealistic to expect that this traffic will transfer to conventional rail services in anything but the long term. As an alternative, road hauliers could be encouraged to use "Piggyback" services where semi-trailers are conveyed on flat rail wagons for the line haul part of the journey. It is currently not possible to operate such services, conveying 4m high road trailers on rail wagons, in the UK because of loading gauge constraints. A study is underway to assess the costs and benefits of enhancing the gauge between the port of Dover and the Channel Tunnel and London and beyond to accommodate piggybank trains and high cube swap-bodies. In parallel, a private company using private funds, seeks to construct and operate a new railway between the North of England and Northern France with adequate gauge to convey piggyback traffic. The Central Railway project, if successful in obtaining the necessary powers and private finance, would be in operation by around 2008. At present the SRA does not have sufficient information to enable it to take a view on the project and has commissioned a high level study to examine the detail of the proposals in order to be able to do so.

  The SRA is liasing with Dover Harbour Board and other relevant parties on plans to reconnect the port to the rail network to facilitate the transfer of swap-bodies and semi-trailers between rail and sea. Phase 1 is a small-scale venture concerned with the reconnection of the former freight yard adjacent to Western Docks, the cargo being transferred between there and the ferries in Eastern Docks by lorry. Phase 2 would involve reinstatement of the train ferry (to and from Dunkerque) to its former berth in Western Docks with a direct link to the rail network utilising the linkspan currently in "kit form" alongside the docks. The third phase is connected with Dover's long-term plans to construct a new port, "Westport", between the current Western Docks and Shakespeare Cliff with a direct link on to the Folkestone to Dover railway line. All phases of the proposed development would require gauge enhancement between Dover and the Channel Tunnel to London routes, hence the inclusion of Dover in the study for Tunnel traffic.

  The port of Portsmouth has identified opportunities for sea to rail intermodal transfer although direct rail access to the docks is not possible. A site has been identified as a possible location for intermodal interchange, which would involve a short road journey between the ships and the railhead and discussions are proceeding between the port authorities and the SRA on progressing the plans. It is also possible that other business may be attracted to the railhead which would add to the viability of the scheme. In order to reflect the need to convey 2.9m high x 2.6m wide swap-bodies on rail wagons, the route to Portsmouth (to Eastleigh or Southampton) has been included in the study for container traffic between Southampton and Reading and beyond.

(3)  Other Traffic

  In total there about 100 commercially active ports in the UK handling a wide range of cargoes, half of the tonnage being represented by oil and oil products. It is often difficult for the smaller ports to justify a link to the national rail network if there is not sufficient critical mass of traffic. Freight Facilities Grant can be used to assist schemes where there is public benefit but which may not be fully commercial. Recently grant has been used to facilitate the provision of a rail service to the port of Newport and the sum of £15.6 million was recently awarded to reinstate the link to Portbury Docks. At the end of March this year a new terminal, funded by grant through the Welsh Assembly, will be opened in Wentloog which is designed to serve South Wales ports. Discussions between the SRA and Associated British Ports have been held with a view to submitting a grant application to reconnect Kings Lynn docks to the rail network. This would initially be predicted against East Anglian grain traffic bound for the North West and Scotland (a business lost to road haulage some years ago) but could be used to encourage other traffic flows on to rail at a later stage. The same parties are also involved in compiling a grant application to facilitate further development of the Humber International Terminal at Immingham.

  In may cases rail services can be provided which are self-financing: the movement of coal in bulk from ports, such as Hunterson in Scotland, for example, comes into this category. In other instances there will need to be support in the form of Freight Facilities Grant, to assist with investment in equipment and facilities and Track Access Grant, paid to train operators, to reflect the different extent to which the external costs of road and rail are covered by pricing mechanisms. The SRA is now responsible for the administration of these grants (in consultation with the Scottish Executive and the Welsh Assembly) and will use them to develop the freight strategy and to achieve the 80 per cent growth target. Whilst the aspirations of smaller ports are not necessarily easy to incorporate into a national rail strategy, applications for grant can be made and will be considered individually on their merits.

  Again, traffic to and from other ports will be an important factor in determining the need for capacity enhancements and for example, the possibility of modal shift for traffic to and from the Humber ports is being taken into consideration in the Trans-Pennine franchise replacement process.

(4)  Irish Sea Traffic

  The surge in the Irish economy of the past few years has generated substantial new business on the Irish Sea. Traffic between the mainland of the UK and Northern Ireland and Eire travels from a number of ports on the West coasts of England, Wales and Scotland. The majority is conveyed by road on this side of the Irish Sea and a significant volume "landbridges" en route from Ireland to the continent. The less time-sensitive traffic tends to travel direct from Ireland to the continent whilst the cargoes that cross the UK mainland are predominantly time-sensitive and often temperature-controlled. The latter cargoes are primarily suited to HGVs and part of the SRA freight strategy will be to examine possibilities for conveying such vehicles on "piggyback" services. As with other such services elsewhere, the gauge of the routes concerned will need to be considered carefully to ascertain costs and benefits.

(5)  Summary

  The SRA regards the securing of a greater proportion of port traffic as being vital in our efforts to achieve the 80 per cent growth target laid down by the ten year plan. The elements of our strategy, described previously, are designed to facilitate growth in this sector. We shall be addressing, in particular, the issues of gauge and capacity on key routes in order to enable operators to run bigger, faster, heavier and longer trains on a high quality, 24 hours per day, seven days per week network. This will significantly improve the economics of railfreight operation and its competitiveness with road haulage. In addition, there are funding mechanisms available to assist port operators, shipping lines, railfreight companies and others to achieve modal shift. Furthermore, the deep-sea intermodal market will be the first to benefit from application of the new company-neutral revenue support scheme.

John Chapman

Freight Team

Strategic Rail Authority

26 February 2001

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