May 17, 2020

The state of Rail Freight in the UK

industry-focus/procurement/state-rail-freight-uk
Freddie Pierce
4 min
Railroad
The UK has undergone a severe recession and public spending cuts could curtail plans for further investment in infrastructure. All of which have a treme...
The UK has undergone a severe recession and public spending cuts could curtail plans for further investment in infrastructure. All of which have a tremendous bearing on rail freight’s future… but what a future it could be.

Since privatisation, rail freight has seen increased use among operators and logistics providers, creating a very efficient and competitive market. There are various reasons why major retailers are turning to rail. Compared to road, rail offers very convincing economies of scale which can dramatically reduce transport costs. Railways run to a rigorous timetable, making them suitable for reliable logistics planning. Then there are the environmental benefits. Every tonne of freight carried by rail produces far less CO2 than if moved by road.

For the UK as a whole, rail freight is also highly significant. With the economic recovery, however slow, eventually comes increased congestion on our roads, which will throw the spotlight back onto alternatives like rail. Planned container port development in the UK, with the targets they have been set through the planning system for rail use, will bring more container traffic directly onto rail through improved port facilities and rail links. Also, deals are now in place to improve access to the Channel Tunnel and High Speed 1, lending UK rail freight an international aspect that it never had before.

There is the potential to double rail freight from 23.5 billion tonne km to over 50 billion per year by 2030, thanks largely to more intermodal traffic. However, if rail is to achieve this potential it needs support. It is too easy to assume that environmental pressure or problems with road transport will deliver the hoped-for growth without rail itself having to change.

For government, tighter spending rounds are likely, but we have to make sure that rail freight funding does not evaporate. The development of rail’s Strategic Freight Network is currently funded at £200 million over five years (2009-14). This funding must be protected and then continued at or above this level over the next five-year period – and there was certainly an indication by Lord Adonis, the Transport Secretary, at an FTA meeting at the Labour Party Conference that this is being considered.

However, public policy on infrastructure is not just about spending. For rail to meet its full potential we need easy access to the network in the right places. Suitable rail freight terminal sites must be found and approved for development if we want to get serious about removing more goods from roads and onto rail. Sadly, common sense rarely wins in the fight against Nimbyism where intermodal terminals are concerned.

Looking beyond the Government, Network Rail (NR) has to meet its cost-reducing targets and, in doing so, ensure that rail continues to offer a price competitive service. In theory, NR’s proposals to introduce Sunday running will help to achieve this goal. However, the corollary of opening rail lines up seven-days-a week could mean more lines closing at night, a disadvantage to freight train operators. NR should address this issue through improved working practices. After all, the road network is always open, so too should the rail freight network.

Rail freight operators must keep their service levels high, otherwise retailers and manufacturers will return to their comfort zone of road services. Competition among operations must be encouraged to help develop innovative and bespoke services. Therefore, the Office of Rail Regulation has to keep barriers to entry (i.e. freight paths) low.

Finally, international rail freight faces a series of barriers before it can realise its full potential. For the UK the crucial issue will be the Channel Tunnel and High Speed 1. We need a long-term deal that will reduce costs closer to NR standard per km charges for freight. Only then will the offering become truly competitive and allow the UK to take full advantage of long-distance European rail freight services. High Speed 2 can play an important role here too, depending upon the cost of freight access.

Rail freight is already a key link in the UK’s supply chain, but with more businesses waking up to and relying upon its many advantages, the possibilities for rail freight’s growth are potentially vast.


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Jun 16, 2021

EU and US agree end to Airbus-Boeing supply chain tariffs

supplychain
Boeing
Airbus
tariffs
3 min
Supply chains embroiled in Airbus-Boeing dispute will no longer be impacted by $11.5bn tariffs imposed on food and beverage, aircraft and tobacco

The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic. 

Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years. 

It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC. 

The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn. 

In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products. 

Boeing-Airbus dispute by the numbers  

  • The dispute began in 2004
  • Tariffs suspended for 5 years 
  • $11.5bn worth of goods affected by tariffs
  • $3.3bn in duties paid by businesses to date 
  • 15% levy on aircraft and 25% on non-aircraft goods suspended

Both sides welcome end to tariffs 

European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.

“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.

Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”. 

The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."

This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.

Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”

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