Freight sector urges government to ‘supercharge’ rail freight growth amid economic challenges

The freight sector has called on the UK government to "supercharge" the growth of rail freight as part of its wider Plan for Change, which aims to stimulate economic growth, achieve net zero emissions and facilitate housebuilding. New analysis conducted by Rail Partners and compiled by Steer highlights the increasing pressures faced by rail freight operators. The report, titled A Greener Track, reveals that the costs of transporting goods by rail have risen significantly, outpacing road freight costs by more than three times over the last decade.

This disparity is partly attributed to government policies that have affected the competitiveness of rail freight. To foster growth in this sector, industry representatives are urging the government to address the widening cost gap between rail and road transport. Although the government has publicly committed to establishing a target for rail freight growth, stakeholders argue that actionable measures are essential to ensure rail remains a viable alternative to more carbon-intensive transport options.

As the government prepares for an upcoming consultation on rail reform, expected in the coming weeks, Rail Partners and freight operators are advocating for a framework that supports rail freight growth. They are pushing for the retention of existing legal protections - such as long-term access rights - and a stable charging regime, which are crucial for maintaining the attractiveness of rail freight. The rail freight sector contributes substantially to the UK economy, generating GBP2.45bn annually, with a significant portion of these benefits - around 90% - occurring outside London and the south east.

The sector directly employs 6,500 individuals, while also supporting numerous additional roles within the logistics supply chain. Rail freight not only plays a vital role in the economy but also offers environmental benefits. For instance, transporting freight by rail generates 76% less CO2 emissions compared to road transport.

Furthermore, one freight train can carry enough materials to construct 30 houses, aligning with the government's target of building 1.5M homes. Political consensus has emerged around the need to shift more goods onto rail. Consequently, there are now ambitious long-term targets to increase rail freight by 75% by 2050[1], with an interim target of 7.5% in England and Wales and by a minimum of 8.7% in Scotland by 2029.

However, these targets come at a time when rail freight operators face increasing challenges.

Recent research highlights that rail freight costs have surged more than three times faster than road haulage costs since 2015. Noteworthy increases include a 9% rise for electric intermodal services, an 8% rise for construction and a staggering 20% for international services. Furthermore, track access charges for rail freight have risen by 26% in real terms since 2015, while road charges have seen a drastic 41% decline during the same period.

Furthermore, rail freight energy costs have risen 20 percentage points more in real terms
than road energy costs since 2015.

This is largely driven by the decision to
freeze road fuel duty for 15 consecutive years.

As businesses increasingly seek low-carbon logistics solutions, the affordability of rail freight remains crucial in a sector characterised by tight margins and price sensitivity. The report advocates for immediate action to address these rising costs, positing that halving track access charges while increasing road fuel duty in line with inflation since 2011 could boost rail freight's market share by an impressive 31%. Such a policy shift would potentially result in a reduction of 370,000 kilotonnes of CO2 emissions and avoid over 174M.km of HGV journeys annually.

The societal advantages of rail freight, including reduced congestion, lower emissions, less noise pollution, and improved safety, are significant but not adequately factored into pricing structures. Rail Partners suggests several measures to ensure the sustainability and growth of the rail freight sector: Strengthening the Rail Reform Bill: The report calls for the retention of essential legal protections for investors, including long-term access rights and a stable charging regime.

Incentivising modal shift: Increasing funding for the Mode Shift Revenue Support scheme, which assists in bridging costs between rail and road freight, could eliminate an estimated 900,000 HGV movements each year. Creating fair competition between freight modes: Reflecting the societal benefits of rail freight in pricing structures can empower customers to make more environmentally friendly decisions. Enhancing capacity for rail freight services: Promoting longer and heavier freight services and investing in infrastructure upgrades would further increase the competitiveness of rail freight.

The full report A Greener Track: Making Rail Freight Cost Effective can be found here[2]. Rail Partners chief executive Andy Bagnall said: "Rail freight is one of the lowest-carbon forms of land transport, but with rail costs rising three times faster than road, Britain increasingly risks losing out on the benefits the sector has to offer in terms of growth and supporting government's wider missions. "Freight operating companies want to invest in the UK and work with government to make rail more competitive, to help decarbonise the transport sector and reduce congestion on roads.

But rail freight growth will not happen on its own. Without measures to address the widening cost gap between rail and road, freight customers could be priced out of making the right decision for the environment and the economy." GB Railfreight chief executive John Smith said: "There is broad consensus on the economic, environmental and societal benefits of rail freight to us all.

This report sets out the need for a level playing field between different modes of freight transport to drive growth. "Government policy decisions, such as the freeze on fuel duty, continue to benefit road freight over rail freight. As rail freight operators, we want to continue to invest in the UK and stand ready to work with government on policies that will make rail more competitive to support growth and the delivery of their missions."

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References

1. ^ increase rail freight by 75% by 2050 (www.newcivilengineer.com)
2. ^ can be found here (railpartners.co.uk)
3. ^ To receive New Civil Engineer's daily and weekly newsletters click here. (www.newcivilengineer.com)