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Railway Engineering - UK - March 2018

“Orders for new passenger trains are at a historically high level, with more than 6,000 carriages committed to between April 2014 and March 2021, according to the latest Long Term Passenger Rolling Stock Strategy. With a capital cost of more than £10 billion, around 50% of these new vehicles are expected to be built in Britain. In response to the sharp upturn in UK train orders, and with further lucrative orders on the horizon, most notably HS2, a number of major train manufacturers are investing heavily in UK facilities. While the new rolling stock introduction is expected to peak with the delivery of current orders, the long-term outlook for new build remains positive.”
– Claudia Preedy - B2B Analyst

This Report looks at the following areas:

  • How has UK rail infrastructure investment developed in the last five years?
  • What has been the financial performance of the key players in the UK rail sector’s supply industry in recent years?
  • What are the key drivers for UK railway investment?
  • What are Network Rail’s expenditure plans for Control Period Five?
  • What is the projected future demand for rolling stock in Great Britain?

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Table of contents

  1. Executive Summary

      • The market
        • Government funding for railway sector falls in 2016/17, as funding for Crossrail ends
          • Figure 1: Government railway funding, 2013-17
        • Network Rail overspends on renewal schemes in first three years of current control period CP5
          • Figure 2: Rail renewal expenditure by asset, 2016/17
        • Network Rail embarks on largest rail enhancement and investment programme in CP5 2014-19
          • But this major rail modernisation programme is posing significant challenges for Network Rail
            • UK rolling stock fleet growing at fastest rate for decades
              • 31 major rail projects currently in infrastructure pipeline
                • Figure 3: Rail infrastructure pipeline, as of autumn 2017
              • HS2 will be by far the largest rail infrastructure project over the next two decades
                • Market factors
                  • Network Rail’s funding and delivery outputs are agreed in five-year blocks called control periods
                    • Recommendations set out in Shaw report could result in biggest shake-up of Network Rail since privatisation
                      • Network Rail launches transformation plan in 2016, implementing many of the measures set out in Shaw report
                        • Government publishes strategic vision for rail
                          • Companies
                            • What we think
                            • Key Insights

                                • What steps has Network Rail taken towards devolution since the launch of its transformation plan in 2016?
                                  • What are the key proposals contained in the government’s Strategic Vision for Rail?
                                    • What are the government’s proposed changes to the franchising system set out in its Strategic Vision for Rail?
                                      • How is the UK passenger rolling stock fleet expected to develop?
                                      • Introduction

                                          • Definitions
                                            • Methodology
                                              • Abbreviations
                                                • Market positioning
                                                • UK Economy

                                                  • Overview
                                                    • Figure 4: Forecast GDP development 2016-22
                                                    • Figure 5: UK GDP quarterly development, 2004-17
                                                  • Inflation
                                                    • Interest rates
                                                      • House prices
                                                        • Figure 6: UK house price changes, 2006-17
                                                      • Consumer spending
                                                        • Manufacturing
                                                          • Figure 7: UK manufacturing, 2014-17
                                                        • Business investment
                                                          • Figure 8: UK GFCF, chained volume measures, seasonally adjusted, 2004-17
                                                        • Imports
                                                          • Exports
                                                          • Market Factors

                                                            • Key points
                                                              • Drivers of investment in rail industry
                                                                • Rail network funding and regulation
                                                                  • Sir Peter Hendy’s re-plan for Network Rail’s enhancement programme 2014-19
                                                                    • The Shaw report
                                                                      • Network Rail launches transformation plan in 2016, implementing many of the measures set out in Shaw report
                                                                      • Rail Finance

                                                                        • Key points
                                                                          • Overview
                                                                            • Figure 9: Government railway funding, by type, 2013-17
                                                                            • Figure 10: Private investment in railways, by type, 2013-17
                                                                        • Infrastructure Investment

                                                                          • Key points
                                                                            • Introduction
                                                                              • Figure 11: Rail infrastructure in Great Britain, 2012-17
                                                                              • Figure 12: Rail infrastructure in Great Britain, 2013-17
                                                                            • Network Rail embarks on largest rail enhancement and investment programme in CP5 2014-19
                                                                              • Capital expenditure
                                                                                • Figure 13: Rail infrastructure renewals, enhancements & maintenance expenditure in Great Britain, 2012-17
                                                                                • Figure 14: Rail infrastructure renewals, enhancements & maintenance expenditure in Great Britain, 2012-17
                                                                              • Expenditure analysis
                                                                                • Figure 15: Analysis of enhancement expenditure in Great Britain, by type, 2016-17
                                                                                • Figure 16: Renewal expenditure by asset, 2016 and 2017
                                                                                • Figure 17: Private sector investment in track and signalling, 2013-17
                                                                                • Figure 18: Private sector investment in stations, 2013-17
                                                                            • Rolling Stock

                                                                              • Key points
                                                                                • Overview
                                                                                  • Current trends and challenges in the rolling stock market
                                                                                    • Passenger rolling stock parc
                                                                                      • Figure 19: Rolling stock parc, as of March 2017
                                                                                    • UK rolling stock fleet growing at fastest rate for decades
                                                                                      • Average age of rolling stock
                                                                                        • Figure 20: Average age of rolling stock, by sector, 2013-17
                                                                                        • Figure 21: Average age of rolling stock, by sector, 2013-17
                                                                                        • Figure 22: Average age of rolling stock, by company, 2013-17
                                                                                      • Use of railways
                                                                                        • Figure 23: Number of passenger journeys, by sector, 2013-17
                                                                                        • Figure 24: Share of passenger journeys, by sector, 2016/17
                                                                                        • Figure 25: Freight train kilometres on Network Rail infrastructure, 2013-17
                                                                                      • Private sector rolling stock investment
                                                                                        • Figure 26: Private sector rolling stock investment in Great Britain, 2013-17
                                                                                        • Figure 27: Private sector rolling stock investment in Great Britain, 2013-17
                                                                                    • Supply Sources

                                                                                      • Key points
                                                                                        • Production
                                                                                          • Overview
                                                                                              • Figure 28: UK production of locomotives, rolling stock and other equipment, 2012-16
                                                                                            • Segmentation
                                                                                              • Figure 29: Segmentation of the UK production of locomotives, rolling stock and other equipment, by type, 2012-16
                                                                                            • Imports
                                                                                              • Overview
                                                                                                • Figure 30: UK imports of locomotives, rolling stock and other equipment, 2013-17
                                                                                              • Segmentation
                                                                                                • Figure 31: Segmentation of UK imports of locomotives, rolling stock and other equipment, by type, 2013-17
                                                                                                • Figure 32: UK imports of locomotives, rolling stock and other equipment, by type, 2017
                                                                                              • Exports
                                                                                                • Overview
                                                                                                  • Figure 33: UK exports of locomotives, rolling stock and other equipment, 2013-17
                                                                                                • Segmentation
                                                                                                  • Figure 34: Segmentation of UK exports of locomotives, rolling stock and other equipment, by type, 2013-17
                                                                                              • Investment Profiles

                                                                                                • Key points
                                                                                                  • Introduction
                                                                                                    • Figure 35: Train operating companies, as of January 2018
                                                                                                  • DfT proposes changes to franchises in its 2017 ‘Strategic Vision for Rail’
                                                                                                    • Train operating companies
                                                                                                      • Abellio Greater Anglia
                                                                                                          • Figure 36: Key statistics for Greater Anglia, 2015-17
                                                                                                        • Arriva Trains Wales
                                                                                                          • Figure 37: Key statistics for Arriva Trains Wales, 2015-17
                                                                                                        • c2c
                                                                                                            • Figure 38: Key statistics for c2c, 2015-17
                                                                                                          • Chiltern Railways
                                                                                                              • Figure 39: Key statistics for Chiltern Railways, 2015-17
                                                                                                            • Cross Country
                                                                                                              • Figure 40: Key statistics for Cross Country, 2015-17
                                                                                                            • Virgin Trains East Coast
                                                                                                                • Figure 41: Key statistics for Virgin Trains East Coast, 2015-17
                                                                                                              • East Midlands Trains
                                                                                                                  • Figure 42: Key statistics for East Midlands Trains, 2015-17
                                                                                                                • Eurostar
                                                                                                                  • Thameslink, Southern, and Great Northern (TSGN)
                                                                                                                      • Figure 43: Key statistics for Govia Thameslink Railways, 2015-17
                                                                                                                    • Great Western Railway
                                                                                                                        • Figure 44: Key statistics for Great Western, 2015-17
                                                                                                                      • First Hull Trains
                                                                                                                        • Abellio ScotRail
                                                                                                                            • Figure 45: Key statistics for Abellio ScotRail, 2015-17
                                                                                                                          • TransPennine Express
                                                                                                                              • Figure 46: Key statistics for TransPennine Express, 2015-17
                                                                                                                            • Grand Central
                                                                                                                              • Heathrow Connect
                                                                                                                                • Heathrow Express
                                                                                                                                  • West Midlands
                                                                                                                                      • Figure 47: Key statistics for London Midland, 2015-17
                                                                                                                                    • London Overground
                                                                                                                                        • Figure 48: Key statistics for London Overground, 2015-17
                                                                                                                                      • Merseyrail
                                                                                                                                          • Figure 49: Key statistics for Merseyrail, 2015-17
                                                                                                                                        • Northern Rail
                                                                                                                                          • Figure 50: Key statistics for Northern Rail, 2015-17
                                                                                                                                        • North Yorkshire Moors Railway
                                                                                                                                          • Southeastern
                                                                                                                                              • Figure 51: Key statistics for Southeastern, 2015-17
                                                                                                                                            • South West Trains
                                                                                                                                                • Figure 52: Key statistics for South West Trains, 2015-17
                                                                                                                                              • TFL Rail
                                                                                                                                                • Figure 53: Key statistics for TFL Rail, 2016-17
                                                                                                                                              • Virgin Trains West Coast
                                                                                                                                                  • Figure 54: Key statistics for Virgin Trains West Coast, 2015-17
                                                                                                                                                • West Coast Railway
                                                                                                                                                  • Freight operators
                                                                                                                                                    • Colas Rail
                                                                                                                                                        • Figure 55: Key statistics for Colas Rail, 2017
                                                                                                                                                      • Direct Rail Services
                                                                                                                                                          • Figure 56: Key statistics for Direct Rail Services, 2017
                                                                                                                                                        • DB Cargo UK (formerly DB Schenker Rail)
                                                                                                                                                          • Freightliner Group
                                                                                                                                                              • Figure 57: Key statistics for Freightliner in the UK, 2017
                                                                                                                                                            • GB Railfreight
                                                                                                                                                                • Figure 58: Key statistics for GB Railfreight, 2017
                                                                                                                                                              • Mendip Rail
                                                                                                                                                                • Rolling stock operating companies
                                                                                                                                                                  • Angel Trains
                                                                                                                                                                    • Porterbrook Leasing Company
                                                                                                                                                                      • Eversholt Rail Group
                                                                                                                                                                        • QW Rail Leasing
                                                                                                                                                                          • Network Rail
                                                                                                                                                                            • London & Continental Railways/HS1
                                                                                                                                                                              • High Speed Two Ltd
                                                                                                                                                                                • Civils contracts for phase 1 awarded in July 2017
                                                                                                                                                                                  • Shortlisted bidders for HS2 train contracts revealed in November 2017
                                                                                                                                                                                    • Contractors shortlisted for HS2 station design contracts
                                                                                                                                                                                    • Supply Industry Structure

                                                                                                                                                                                      • Key points
                                                                                                                                                                                        • Industry development
                                                                                                                                                                                          • Hitachi starts production at new UK manufacturing plant in 2016, joining Bombardier as the country’s only rolling stock manufacturers
                                                                                                                                                                                            • Spanish rolling stock manufacturer CAF plans to open UK assembly plant in 2018
                                                                                                                                                                                              • Alstom also considering UK manufacturing if firm wins major UK contracts
                                                                                                                                                                                                • Government Strategy for UK Railway Supply Industry
                                                                                                                                                                                                  • Industry structure
                                                                                                                                                                                                    • Figure 59: Analysis of the changes in the structure of the railway & tramway rolling stock manufacturing industry, 2013-17
                                                                                                                                                                                                  • Structure by employment
                                                                                                                                                                                                    • Figure 60: Analysis of the employment structure of the railway & tramway rolling stock manufacturing industry, 2016-17
                                                                                                                                                                                                  • Structure by turnover
                                                                                                                                                                                                    • Figure 61: Analysis of the financial structure of the railway & tramway rolling stock manufacturing industry, 2016-17
                                                                                                                                                                                                  • Company profiles
                                                                                                                                                                                                  • Alstom Transport UK

                                                                                                                                                                                                      • Alstom opens new rolling stock modernisation facility in 2017
                                                                                                                                                                                                        • Alstom announces merger with Siemens Mobility in 2017
                                                                                                                                                                                                          • Company strategy:
                                                                                                                                                                                                              • Figure 62: Financial analysis of Alstom Transport UK, 2014-17
                                                                                                                                                                                                          • Bombardier Transportation UK

                                                                                                                                                                                                                • Figure 63: Financial analysis of Bombardier Transportation UK, 2012-16
                                                                                                                                                                                                              • Company strategy & outlook
                                                                                                                                                                                                              • Amec Foster Wheeler

                                                                                                                                                                                                                  • Transformation programme sees Amec Foster Wheeler sell non-core assets
                                                                                                                                                                                                                    • Amec Foster Wheeler acquired by Wood Group in October 2017
                                                                                                                                                                                                                      • Company outlook
                                                                                                                                                                                                                          • Figure 64: Financial analysis of AMEC Foster Wheeler, 2012-16
                                                                                                                                                                                                                      • Amey/Amey Rail

                                                                                                                                                                                                                          • Recent acquisitions
                                                                                                                                                                                                                            • Amey UK launches transformation programme in 2016
                                                                                                                                                                                                                                • Figure 65: Financial analysis of Amey UK, 2012-16
                                                                                                                                                                                                                              • Amey Rail
                                                                                                                                                                                                                                • Company performance
                                                                                                                                                                                                                                  • Figure 66: Financial analysis of Amey Rail, 2012-16
                                                                                                                                                                                                                              • Angel Trains

                                                                                                                                                                                                                                    • Figure 67: Financial analysis of Angel Trains, 2012-16
                                                                                                                                                                                                                                  • Company strategy & outlook
                                                                                                                                                                                                                                  • Balfour Beatty Group

                                                                                                                                                                                                                                      • Build to Last transformation programme launched in 2015
                                                                                                                                                                                                                                          • Figure 68: Financial analysis of Balfour Beatty, 2012-16
                                                                                                                                                                                                                                          • Figure 69: Financial analysis of Balfour Beatty by segment, 2015-16
                                                                                                                                                                                                                                      • Knorr-Bremse Group

                                                                                                                                                                                                                                          • Recent acquisitional activity
                                                                                                                                                                                                                                            • Figure 70: Financial analysis of Knorr-Bremse Rail Systems (UK), 2012-16
                                                                                                                                                                                                                                        • Siemens Rail Automation Holdings

                                                                                                                                                                                                                                            • Siemens and Alstom rail businesses to merge in 2018
                                                                                                                                                                                                                                              • Figure 71: Financial analysis of Siemens Rail Automation Holdings, 2013-17
                                                                                                                                                                                                                                            • Company strategy & review
                                                                                                                                                                                                                                            • Babcock Rail

                                                                                                                                                                                                                                                  • Figure 72: Financial analysis of Babcock Rail, 2013-17
                                                                                                                                                                                                                                                • Company review & outlook
                                                                                                                                                                                                                                                • Network Rail

                                                                                                                                                                                                                                                    • Network Rail is delivering its biggest ever investment programme
                                                                                                                                                                                                                                                      • Network Rail encounters major difficulties in delivering enhancement programme at the start of CP5
                                                                                                                                                                                                                                                        • Company performance in 2016/17
                                                                                                                                                                                                                                                            • Figure 73: Financial analysis of Network Rail, 2013-17
                                                                                                                                                                                                                                                        • Eversholt Rail

                                                                                                                                                                                                                                                              • Figure 74: Financial analysis of Eversholt Rail, 2012-16
                                                                                                                                                                                                                                                          • Porterbrook Leasing Company

                                                                                                                                                                                                                                                              • Recent company activity
                                                                                                                                                                                                                                                                • Company strategy
                                                                                                                                                                                                                                                                  • Figure 75: Financial analysis of Porterbrook Leasing Company, 2012-16
                                                                                                                                                                                                                                                              • Hitachi Rail Europe

                                                                                                                                                                                                                                                                    • Figure 76: Financial analysis of Hitachi Rail Europe, 2013-17
                                                                                                                                                                                                                                                                  • Company strategy
                                                                                                                                                                                                                                                                  • Forecast

                                                                                                                                                                                                                                                                    • Key points
                                                                                                                                                                                                                                                                      • Market size
                                                                                                                                                                                                                                                                        • ORR’s original funding settlement for CP5
                                                                                                                                                                                                                                                                          • ORR introduces new targets for Network Rail’s asset management for CP5
                                                                                                                                                                                                                                                                            • Move towards framework agreements during CP5
                                                                                                                                                                                                                                                                              • Sir Peter Hendy’s Review and re-plan for CP5 enhancement programme
                                                                                                                                                                                                                                                                                • Funding for CP5 enhancement schemes enhanced by £2.5 billion
                                                                                                                                                                                                                                                                                  • Network Rail implements Enhancements Improvement Programme
                                                                                                                                                                                                                                                                                    • The Bowe Review
                                                                                                                                                                                                                                                                                      • The Shaw Report
                                                                                                                                                                                                                                                                                        • Network Rail launches transformation plan in 2016, implementing many of the measures set out in Shaw report
                                                                                                                                                                                                                                                                                          • Government publishes its strategic vision for rail
                                                                                                                                                                                                                                                                                            • DfT pledges £47.9 billion funding to Network Rail for CP6
                                                                                                                                                                                                                                                                                              • Infrastructure
                                                                                                                                                                                                                                                                                                • Additional funding for rail infrastructure announced in 2016 autumn statement
                                                                                                                                                                                                                                                                                                  • Rail sector announcements in Autumn Budget 2017
                                                                                                                                                                                                                                                                                                    • Rail infrastructure projects pipeline
                                                                                                                                                                                                                                                                                                      • Figure 77: Rail infrastructure pipeline, as of autumn 2017
                                                                                                                                                                                                                                                                                                      • Figure 78: Rail infrastructure projects pipeline, 2017
                                                                                                                                                                                                                                                                                                    • Crossrail
                                                                                                                                                                                                                                                                                                      • Thameslink Programme
                                                                                                                                                                                                                                                                                                        • Electrification schemes
                                                                                                                                                                                                                                                                                                          • But DfT postpones a number of electrifications schemes in 2016 and 2017
                                                                                                                                                                                                                                                                                                            • Other committed schemes
                                                                                                                                                                                                                                                                                                              • Other named schemes
                                                                                                                                                                                                                                                                                                                • HLOS capacity metric schemes
                                                                                                                                                                                                                                                                                                                  • Borders
                                                                                                                                                                                                                                                                                                                    • Other Scottish projects
                                                                                                                                                                                                                                                                                                                      • High Speed Two (HS2)
                                                                                                                                                                                                                                                                                                                        • Other proposed new rail lines
                                                                                                                                                                                                                                                                                                                          • Rolling stock
                                                                                                                                                                                                                                                                                                                            • Long term passenger rolling stock strategy
                                                                                                                                                                                                                                                                                                                                • Figure 79: Fleet size requirements for passenger fleet under a low growth forecast, 2019-46
                                                                                                                                                                                                                                                                                                                                • Figure 80: Fleet size requirements for passenger fleet under a medium growth forecast, 2019-46
                                                                                                                                                                                                                                                                                                                                • Figure 81: Fleet size requirements for passenger fleet under a high growth forecast, 2019-46
                                                                                                                                                                                                                                                                                                                                • Figure 82: Role of electric rolling stock under the medium growth forecast, 2017-46
                                                                                                                                                                                                                                                                                                                              • Digital railway
                                                                                                                                                                                                                                                                                                                              • Further Sources & Contacts

                                                                                                                                                                                                                                                                                                                                • Trade associations & regulatory bodies
                                                                                                                                                                                                                                                                                                                                  • Institution of Railway Signal Engineers
                                                                                                                                                                                                                                                                                                                                    • Light Rail Transit Association
                                                                                                                                                                                                                                                                                                                                      • Office of Rail Regulation
                                                                                                                                                                                                                                                                                                                                        • Rail Delivery Group
                                                                                                                                                                                                                                                                                                                                          • Railway Industry Association
                                                                                                                                                                                                                                                                                                                                            • Trade magazines
                                                                                                                                                                                                                                                                                                                                              • Global Railway Review
                                                                                                                                                                                                                                                                                                                                                • International Railway Journal
                                                                                                                                                                                                                                                                                                                                                  • IRSE News
                                                                                                                                                                                                                                                                                                                                                    • Modern Railways
                                                                                                                                                                                                                                                                                                                                                      • Rail
                                                                                                                                                                                                                                                                                                                                                        • The Rail Engineer
                                                                                                                                                                                                                                                                                                                                                          • Railnews
                                                                                                                                                                                                                                                                                                                                                            • Rail Professional
                                                                                                                                                                                                                                                                                                                                                              • RailStaff
                                                                                                                                                                                                                                                                                                                                                                • Rail Technology Magazine
                                                                                                                                                                                                                                                                                                                                                                  • Railway Gazette International
                                                                                                                                                                                                                                                                                                                                                                    • Railway Strategies
                                                                                                                                                                                                                                                                                                                                                                      • Trade exhibitions
                                                                                                                                                                                                                                                                                                                                                                        • Traffex 2019
                                                                                                                                                                                                                                                                                                                                                                          • Infrarail 2018

                                                                                                                                                                                                                                                                                                                                                                          Railway Engineering - UK - March 2018

                                                                                                                                                                                                                                                                                                                                                                          £995.00 (Excl.Tax)