The UK’s rail industry is world-class. Having pioneered the development of the railways two centuries ago, the UK continues to lead the way in the design and construction of modern rail systems, and in the management and improvement of the networks already up and running. According to Oxford Economics, the UK rail industry turns over £7bn a year, contributes more than £36bn of gross value added to the national economy and employs more than 240,000 people.
Moreover, UK rail is a growing industry. Domestic rail infrastructure projects offer significant opportunities for British suppliers, but so too does international work, both in the European Union and further afield. The UK’s ambition to double the value of its rail industry exports over the next five to 10 years is entirely achievable.
Opportunities in the UK
At home, rail has enjoyed a renaissance over the past two decades. Passenger journeys in the UK have doubled since 2000 to 3.2 billion a year and are expected to double again in the next 30 years.
Projects continuing to offer opportunities include HS2, Crossrail, Thameslink, upgrades to the London Underground, new Tyne & Wear Metro trains and the electrification of key routes across England and Wales. The UK Government plans to invest £48bn into the rail network between 2019 to 2024.
The good news for the rail industry is that these projects are relatively immune to the effects of the coronavirus pandemic. Indeed, the Government regards infrastructure investment as a crucial means with which to stimulate the economy as it pursues recovery in the months and years ahead.
The UK’s innovative, cost-efficient and productive rail sector is therefore in a strong position to benefit. There is every reason to be optimistic about the domestic outlook.
Opportunities in Europe
If anything, the prospects for UK rail businesses in international markets are even more exciting. Across Europe, Santander is currently tracking more than 90 large projects in 22 countries. There are 40 or so projects where it’s possible to assess the worth collectively at £123bn.
Central and Eastern Europe is a particularly rich source of opportunity. Poland alone has plans to invest £14.7bn in its National Railway Programme. It has already signed a co-operation agreement with the UK on its Solidarity Transport Hub, a project based 40km from Warsaw that’s scheduled for completion by 2027 and worth some £7bn. Santander’s rail team is already working closely with the Department of International Trade’s office in Poland, as well as UK trade bodies, to support UK companies hoping to participate.
In Romania, meanwhile, the Government has approved a €13.7bn transport master plan for the next five years. Rail infrastructure is a significant element of the project with upgrades required across most of the country’s railways network. Hungary and Slovenia also have significant plans for rail investment.
Opportunities further afield
There’s every reason to be ambitious – the internationalisation opportunity is a global one.
In India, for example, the Government has just announced it’s opening up Indian Railways to private sector investment, amid its assessment that £500bn will be required between 2018 and 2030, including £100bn of spending over the next five years.
India has the world’s fourth biggest rail network, but the system is notoriously slow and inefficient. Investment will therefore focus on areas including network upgrades and expansion, electrification, energy efficiency and reducing the carbon footprint. Plus safety, station redevelopment, improved efficiency and speed, and new rolling stock. These are all areas where UK suppliers have significant strengths.
On the other side of the world, Latin America also offers several dynamic market opportunities. In Mexico, for example, ‘Tren Maya’ is one of President Andres Manuel Lopez Obrador’s flagship infrastructure projects. It’s a $7.4bn project to connect the South of Mexico to more developed regions in the North with a 1,525km passenger and cargo line. Santander has strong relationships in the country.
There will be many more chances to secure contracts in the region. In Chile, the Government has approved Chilean State Railways plans to invest $1.9bn between 2020 and 2022. Argentina, home to the world’s eighth largest rail network, is investing heavily in track renewal, electrification, rolling stock, stations and new technology. Brazil is also planning a number of projects, including the operation of a new passenger line in Sao Paolo and a light rail development in Rio de Janeiro.
Preparing for export success
UK businesses have every chance of winning tenders in these projects around the world. The UK’s experience of rail privatisation, market liberalisation, and significant investment in rail infrastructure over the last 20 years has fostered an open and competitive marketplace in a demanding domestic market. This has driven new product and service innovation, and leaves the UK’s rail sector uniquely well-placed to support rail investment worldwide.
The challenge for the sector now, especially for smaller companies, is to grow in size and to increase their international experience in order to be able to better compete on the global stage.
Different businesses will respond in different ways. For example, component and sub-system suppliers may need to go up the supply chain and to offer complete systems such as door systems to be able to sell these globally.
In adjacent sectors, meanwhile, firms working in automotive and aerospace supply chains have an opportunity to diversify into rail. Given the downturn in these sectors, this would be a win-win.
One example is the current focus on reducing the weight of trains to help with fuel efficiency and decarbonisation, particularly in the context of the emergence of alternative fuels such as battery and hydrogen. As such, advanced manufacturing companies such as composites and additive manufacturing (3D printing) companies will be in demand. Many of these companies already have experience of international trade, so could help accelerate the growth of the rail sector and boost its competitiveness.
We work closely with many suppliers in the sector, as well as the relevant industry trade bodies. Leveraging our industry expertise and international network, we look forward to supporting UK rail as it makes further tracks into markets all around the world.
Listen to our webinar on Rail – Opportunities for UK Rail at home and abroad and hear from speakers Elaine Clark, Chief Executive Officer, Rail Forum Midlands and David Brookes, Head of Business Development, Elite KL Ltd. Listen to the webinar.