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The future of rail freight and private sector investment in infrastructure

The Department of Transport published its Rail Freight Strategy in the late summer of 2016 and this strategy includes capacity-constrained demand forecasts for rail freight.  In this article we consider the recent history of rail freight demand forecasting in Great Britain and the implications of the new DfT forecasts for freight transport policy and private sector investment in the UK’s freight transport infrastructure.   

In the late summer of 2016 three reports were released with respect to rail and freight forecasts and related infrastructure development.  The three reports are:

  1. Network Rail’s Freight Network Study (August, 2016) which is based on its earlier Freight Market Study (October 2013);
  2. Transport for the North’s Freight and Logistics Study (7th September  2016) and
  3. The Department for Transport (DfT) Rail Freight Strategy (13th September 2016).

All the demand forecasts included in these documents are based upon MDS Transmodal’s GB Freight Model, but there are important differences in how those forecasts have been used.

MDS Transmodal developed and runs the GB Freight Model (GBFM), which has provided the freight inputs into the DfT’s National Transport Model (NTM) since 2004 and has been used to produce and inform national freight forecasts over the last decade for the Department for Transport (in relation to ports), Network Rail, the Freight Transport Association (FTA) and the Office of Rail and Road (ORR). Using GBFM MDST has assisted a wide range of public and private bodies (ports, developers, regional authorities, Highways England and others), and supplied outputs to many of the leading transport consultancies. The conclusions contained in the National Planning Statement for National Networks concerning the development of Strategic Rail Freight Interchanges (SRFIs) were under-pinned by forecasts originally generated by the GBFM. 

GBFM incorporates available road, rail and port data and the national road and rail networks, and is calibrated to reflect contemporary mode and port shares and road and rail network assignment. It provides a means of producing internally consistent results, reflecting the reasons why it was originally commissioned by the DfT. In the case of the Transport for the North’s Freight and Logistics Study report of September 2016, GBFM was also used to calculate both the user and non-user benefits of the implementation of the strategy (a process that was independently validated to satisfy both TfN and the DfT) and so the model can assess the value which extra network capacity offers to the economy.

Network Rail’s Freight Market Study

Measured in tonne kilometres, Network Rail’s Freight Network Study arrived at an overall growth in rail freight from 2011 to 2033 of 70% or 2.4% per annum. The demand forecasts included in this study were based essentially on the modelling carried out by MDS Transmodal using the GBFM and included in Network Rail’s previous Freight Market Study (FMS) in 2013.  The forecasts were produced as a result of making transparent assumptions using the GBFM about trends in labour and energy costs (consistent with DfT’s WebTAG advice), network enhancement to permit longer trains to operate on the network, weekend operations and the development of several rail linked distribution parks or SRFIs. SRFIs are distribution parks where an intermodal terminal and warehousing share the same site so that local rail to road haulage transfer costs can be eliminated, which makes a major difference to rail competitiveness; in Great Britain they are almost always developed by and paid for by the private sector.

TfN Freight and Logistics Study

The TfN Freight and Logistics Study forecast in its Do Minimum Scenario, for the period 2011-2033, an actual fall in total tonnes lifted by rail of 10% to 100.3 million tonnes if no more SRFIs were built, and growth to 156.5 million tonnes (1.6% per annum) in its Preferred Scenario given a more comprehensive SRFI development programme, particularly in the North of England. This would equate to an annual growth rate of 2.8% from 2011 to 2033 if measured in tonne kilometres.

Measured by market share, these growth rates are significantly lower than those actually achieved for non-coal traffic over the decade between 2004 and 2014. Based upon DfT statistics (Transport Statistics Great Britain), but excluding coal (which volumes are based upon climate politics and not rail’s competitiveness), rail freight volumes grew by 17% over a period when industrial decline in Britain led to an overall fall in freight tonnages (all modes) of 10%.  This implies that rail freight’s non-coal market share, measured in tonnes lifted, grew by a third at 3% per annum. The DfT’s road freight projections in 2014 imply that overall freight growth over the period to 2040 will be around 1% per annum. Taken together this implies that, based purely on trend, rail freight growth in non-coal traffic could be expected to grow at 4% per annum (3% + 1%) and more than double from 2011 to 2033 to over 140 million tonnes without any contribution from coal or the positive impacts of more SRFIs being developed.

DfT’s Rail Freight Strategy

The consultants’ report which accompanies the DfT’s Rail Freight Strategy explicitly states that the model used to develop the forecasts included in their report and in the Strategy itself,

“…does not replace the 2013 Network Rail Freight Market Study and should instead be viewed as a complementary constrained forecast to the FMS unconstrained forecast”.

Those network capacity constraints have the impact in the DfT’s Central Constrained Forecast of reducing by over 80% the forecast volume of domestic intermodal traffic to just 4 million tonnes in 2030. In its Central Case the DfT forecast is for 101 million tonnes (including an allowance for Channel Tunnel traffic) and is therefore almost identical to the level arrived at in the TfN/GBFM results where no more SRFIs are assumed to be developed; overall a cut in total tonnes by rail as compared with 2014.

However, the DfT’s Central Constrained Forecast still anticipates a more than doubling of ports traffic from 15 million to 32 million tonnes lifted between 2011 and 2030. Given that the DfT study appears to have assumed no more capacity along the principal rail corridors (and in some cases less) it is difficult to see how this can be achieved; almost all this ports traffic uses the West Coast Main Line at some point in its journey.

The DfT strategy does, however, highlight the crucial impact of limiting the capacity of the network available to freight. As already noted, the DfT Strategy’s Central Constrained Forecast anticipates that such a capacity constraint is likely to limit the development of domestic intermodal freight to just 4.0 million tonnes, which is only double the traffic that passes through the largest SRFI currently operating (DIRFT, near Daventry). Given that DIRFT is itself being expanded so that it will provide double the level of warehouse floor space and terminal capacity, this projection could imply that the DfT expects no more SRFIs will be built or will, at least, make no contribution towards a shift of freight from road to rail.


Given the market enthusiasm on the part of the major distribution centre developers for SRFIs, one can only arrive at the conclusion that the volume of rail freight volumes in the foreseeable future will be dictated by the relevant capacity that Network Rail is able to make available to freight operators, and that companies considering new rail freight terminals, traction or wagons will need to consider carefully whether such investments are worthwhile.

This relationship between the role of the public sector in providing adequate road and rail network capacity and private sector freight company investment was central to the approach adopted by the TfN study, which recognised the enthusiasm on the part of the freight industry for an expansion of its use of rail, facing a rapidly ageing population of truck drivers and given suitable access to the network. The freight industry is now familiar with the potential that rail offers. The consultants’ report that accompanies the DfT strategy effectively conveys the same message; the most effective role that can be played by Government to promote rail freight is to expand the capacity made available to it on the main north-south routes, thereby encouraging the development of SRFIs. The DfT strategy itself shows that, without such capacity, rail freight potential will be cut by at least 30%. The TfN study revealed that the freight market itself is well aware of rail freight’s potential if that capacity is available and that significant user benefits (cost savings for the freight industry) and non-user benefits (reductions in road congestion and environmental benefits) are thereby available. That report identifies the need to double north-south freight network capacity and provide additional paths across the Pennines if the Northern economy is not to suffer from being relatively ‘remote’ and having inadequate access to rail capacity.

The National Policy Statement for National Networks (published by the DfT in 2014) concludes that there is a ‘compelling need for an expanded network of SRFIs’.  The freight industry itself now appreciates the benefits offered by rail and the major commercial property developers have responded with proposals for new SRFIs.

Our political decision makers need to understand just how important the additional rail freight network capacity is to improving the efficiency of the British freight transport industry, as it allows the developers of SRFIs to invest with confidence which, in turn, allows British industry to reduce its transport costs and secures modal shift from road to rail.