Rail investment can help the Government unlock growth

Credit: Jack Cousin / Shutterstock.com

Darren Caplan, Chief Executive | Railway Industry Association

5 min read05 June Partner content

Railway Industry Association (RIA) Chief Executive Darren Caplan argues that rail investment can boost economic growth, create jobs and connect communities.

Next week’s Spending Review will probably be the most significant statement about the direction of the Government and its priorities over the course of this Parliament. Decisions about the allocation of capital spending in the years ahead will provide unambiguous indications about the strategic objectives of Ministers and will inform business decisions to a scale of billions.

Chancellor Rachel Reeves has been unequivocal that ‘growth’ is the foundation stone of the Government’s domestic political and economic agenda notwithstanding the small matter of events. We at the Railway Industry Association (RIA) – at the start of our 150^th anniversary year– believe that rail remains extremely well-placed to support the ambition of Ministers to deliver prosperity and social value across the UK.

Rail reform is a longstanding and totemic policy for the Labour Party and the Government and implicit within its overall approach is the role of the industry as an economic enabler and creator of jobs as well as a connector of communities. This was set out in Labour’s Plan for Rail document, published last year before the election, which pledged to restructure the railway and set out a long-term pipeline of work – both infrastructure and rolling stock related – for the rail supply sector.

Rail is also an important pillar of the Government’s commitment to devolving more power to the country’s regions and supporting city regional connectivity. The National Infrastructure Commission, a former Treasury agency, found that the productivity of city regions is directly related to the quality of transport connections. It’s a reminder that rail connections are key to increasing the use of public transport in the many new housing developments across the country. The recent reopening of the Northumberland line has been a great success and a reminder of the huge latent demand for rail services across the UK.

Chancellor Reeves’ first Budget last October was broadly positive from a strategic rail perspective and RIA welcomed undertakings to advance HS2 tunnelling between Old Oak Common and Euston as well as commitments to progress key enhancements such as the TransPennine Route Upgrade (TRU) and East West Rail (EWR).

The Spring Statement in March reaffirmed these commitments and we reminded Treasury Ministers that delays to decisions on major projects, enhancements, as well as new train-building and refurbishments do not create a positive climate for business investment.

The Chancellor has promised to set out a programme of more than £100 billion of capital investment next week. Alongside this the Rail Minister Lord Peter Hendy told RIA in a letter last month that the Spending Review will include a four-year investment programme for rail.

RIA looks forward to the details of these announcements as clarity on the capital programme for rail investment cannot come quick enough for the many rail suppliers across the UK. This follows a challenging period for the supply chain, with great uncertainty over spending across existing rail infrastructure, new train orders and enhancements to the network, during which the rail workforce has shrunk by over 9 per cent in a year¹, risking critical skills loss.

Elsewhere the pace of the rail reform agenda, which began in 2018, has compounded a sense of uncertainty although we hope there will be quick and collaborative progress on developing the plans for how Great British Railways will work in practice with the publication of the new Railways Bill (expected) this summer.

The Chancellor has good reasons to be confident in the medium and longer-term outlook for rail. A report by Steer, which RIA commissioned in 2024, forecast that passenger numbers would grow between 37 per cent and 97 per cent in the next 25 years², subject to political priorities and support. RIA told Treasury officials earlier this year that growing passenger demand for rail travel and substantial population growth in the years ahead will be sources of significant revenues for the Exchequer going forward. We, again, restate our ask of Government to publish a long-term strategy for rail which can consider the future capacity needed to accommodate this growth in passenger demand, alongside the existing 75 per cent freight growth target.

We hope Chancellor Reeves will use next week’s statement to leverage private investment across transport infrastructure including rail. The rail economy supports over £40 billion Gross Value Added (GVA) in economic growth, £14bn in Treasury revenue, and over 640,000 jobs across the UK³. What’s more, rail jobs in the supply chain have 29 per cent higher productivity than the national average (at £74,100 GVA per job)⁴. So the challenging outlook for public finances means the Government should now look to unlock rail’s potential as a way of channelling external finance into rail infrastructure, stimulating those economic benefits even further.

Our international competitors continue to invest in rail. A report by Unife, the European rail trade association, forecasts that the rail industry will grow at least 2.7 per cent a year in European countries and around the world every year up to 2027⁵. Other countries have been using well established private investment models to support delivery of major new rail schemes, alongside public investment. Given the UK’s proud rail heritage, in its 200th year, we are as a country uniquely placed to support a thriving domestic industry that can also supply to a growing international market.

So, we encourage the Chancellor to be ambitious with her plans for rail investment next week. More capital spending and a long-term plan for rail can help grow the economy and create thousands of jobs. Be bold and be brave on rail.