The Rail Supply Group (RSG) recently launched its Vision Statement. This sets out a series of aims for the railway industry which include doubling export volumes, attracting the best talent into the UK rail industry, and encouraging small and medium-sized enterprises (SMEs) to become involved in the global rail market.

But what is the RSG? After all, there is already a plethora of railway industry bodies and acronyms, including the Rail Delivery Group (RDG), Railway Industry Association (RIA), Rail Safety and Standards Board (RSSB), Office of Rail Regulation (ORR) and the Rail Accident Investigation Branch (RAIB – of which more elsewhere in this issue).

To find out, Rail Engineer visited the group’s co-chairman Terence Watson, who is also country chairman of Alstom, and asked him how the RSG had come about.

Starting position

“First of all, let’s rewind just a little bit and look at the context. We have a railway which by design is private and driven by a franchise process, and Network Rail which is effectively commercially structured but a Government- owned company. And the Government’s primary devices to run the railway are through statutory management of the franchises and the safety systems and how you pay for all those. They are all connected to the same thing, but none of them connect to the supply chain, so that’s the first point.

“The second point is that the railway, when it was first privatised, was a really immature laboratory experiment. If you look at the last decade, there have been one or two quite significant switches in the way that we’ve operated to try and get the bits of the railway that were working less-effectively to work better. McNulty’s report on efficiency is one example of that, the way that the franchises were run and driven and bid for is another one.

“So there’s been fine-tuning, but really at no point have we had a significant technological change. We’ve not had a period where the questions asked of the railway are going to be answered and addressed by technology and products. It was more driven by contract forms and developing the here and now – taking up the slack if you like. “But three things have happened in the background. The first is that franchisees can’t really have a mature dialogue on long-term technology. Franchises are too short and they’re not financed to drive a technology investment, which is a risk.

“The second thing is that we aren’t exporting much. Franchises don’t help you export products to sell to overseas markets. And the third is there is little leadership, so that means that it’s not just the hollowed out supply chain at the top level that’s an issue, it’s the sub-structures. There are 3,500 SMEs and they’re not really sure which way to go to invest in the right way and sell to Network Rail or to train operators.

“The world is now booming in railway terms and technology is also being invested in at a rate as never before, the most obvious of those is new signalling systems. We’ve taken up the slack, but so has the world, so the rail market is growing at about 2% per annum. The UK is probably going to be running at around five times that over a five-year period.”

Increased turnover and exports

Does Terence really think that growth in the UK, in railway terms, will hit 10% per annum?

“In a 5-year period I think it probably will. If I look at signalling, just as a good example, Alstom is probably going to produce, in the next two-year period, twice the value as it did four years ago. And then we’ve got electrification programmes, we’ve got new train building and so on, all at the same time, so yes, the conditions are riper and richer.

“But there are two further changes coming along. The first is that we are now looking longer term. HS2 is a good example of that.

“The second is that, while we want to buy the best, we’d also like it to be local.

“In other words, we believe that projects are more deliverable, more reliably deliverable, if they are supplied from the home base. That doesn’t need to mean what it used to in the old days, but it does mean that suppliers need to bring maximum added value here in the UK – that was probably underplayed in the preceding decade.

“Connected to that is the fact that the overseas markets, the so-called lower cost economies, aren’t. If you add tax and duties and you add shipping costs and shipping time we’re saying we’ve almost reached that reassuring moment where things can be done for about the same cost here overall.”

Difficulties to overcome

That’s good news for the UK, but is British industry ready to take advantage of the opportunity?

“That’s the problem. We have a longer-term set of ambitions that are much more strategic in nature, but no machine to do it. The railway is not joined up – we’ve got the franchises and we’ve got a Government and its DfT (Department for Transport) organisation, which is transport, not just railways. The franchisees themselves can be winners or losers on a short-term basis and therefore the supply chain is having to work with all of them. However, they’re not getting any strategic guidance on technology from that dialogue, although there’s a massive amount of goodwill and interest.

“In addition, the supply chain’s balance sheets are not being used, so there’s a massive problem growing which is that there’s less money around, and what there is has to be proved to be value for money before it’s spent.

“Going into a new Government there isn’t the ring-fenced money for the railway with absolutely solid projects that would justify all of the spend we currently need, and the balance sheets of the big companies aren’t being energised at all.”

Initial embarrassment

The combination of significant growth in the UK industry, taken with growth of the world market, and the lack of joined-up thinking amongst the major suppliers – were they what eventually brought about the RSG?

“In a way. It all started a few years ago when the industry gathered for a meeting – a forum it was actually called. I didn’t know what to expect. There were 40 people in the room. There were two Secretaries of State, and senior officials of the department, and I think the ambition for the meeting was for us, the railway, to present ourselves to the Government.

“To say that we were not joined up in the meeting was an understatement. We had absolutely no way to express ourselves, either as suppliers or with clients in the room. So what we ended up with was a general conversation about skill gaps and stuff like that, but nothing came out of it.

“The meeting disbanded and I came away thinking that the Secretaries of State must have thought we were awful fools.”

That sounds like an embarrassing start to the programme. The railway had one chance to make its case to Government and had blown it.

“That’s right. But everyone else felt as I did, so the suppliers went away and sat down and talked this through and decided to write to the Secretary of State and say: ‘Don’t give up on the forum, but it needs to change and there’s something missing.’

“Then we got ourselves busy, along with the Railway Industry Association, the Rail Delivery Group, the rolling stock leasing companies (ROSCOs) and Network Rail, and we wrote to them again saying: ‘If you give us some time we would like to propose something different than a forum that focuses on the supply chain.’

“The Secretaries of State, both of them, were not particularly minded to go along with that straight away because they were just a bit disheartened at what they’d seen. They didn’t want to see us until we’d got ourselves sorted out.”

The railway is not strategic

So that was the first task, for the railway industry to ‘sort itself out’. How disjointed was it? Terence was frank in his reply.

“It was all a muddle. The RDG and the train operators (TOCs) were saying they had no connections with the supply chain. The supply chain were saying they had no connection with the ROSCOs and they didn’t run franchises, and the train manufacturers only had connections with the companies who were actually buying trains. Technology was completely out of the window.

“So we spent another few months, pulled a small team together and started to look at what other sectors did. We talked to BIS (Department for Business, Innovation & Skills) as well as the DfT and they gave us the steer to have a look at the 11 strategic sectors. I was dismayed when I realised that there were 11 industry sectors which were classed as ‘strategic’ and the railway wasn’t one of them.

“I was not alone in being dismayed because it meant a lot to all of us that the railway, with all the importance that was being expressed, was not strategic. The automotive industry was, and aerospace and offshore wind and so on, but not us. The 11 sectors that currently have strategic status get first call on financing, they get a minister’s interest and attention, they have vision documents, a strategic document, a board and let me say, a very, very clear direction.

“The strategic sectors all had Councils, and the railway didn’t. We had RIA, and the RDG, but they were different – they weren’t an industry council. There is a standard model – it has no more than 15 seats to represent the whole industry. So we decided to set one up.

“The 15 seats include both Secretaries of State and one official from each department – Clare Moriarty from DfT and Janice Monday from BIS. That leaves 11 from the industry.

“Those 11 are all representatives of the whole industry, not just their part of it. However, we have a good mix and we include a civil contractor, signaller, a ROSCO, a TOC, Network Rail and an SME. The seats rotate every two years.”

Getting started

Having set up a council, what were its first steps?

“We have just released our vision document in which you’ll see five strategic workstreams. One individual or two from the council lead each workstream which cover SME development, skills, exports, technology, and HS2.

“One of our vision challenges is growing exports. The Government’s looking for a trillion pounds of industrial exports from the UK and we want the railways to be a part of that.

“Why is HS2 a workstream? The answer is because it’s about how the suppliers work with HS2, not how HS2 is. Suppliers are not in a position to understand that to become a supplier for HS2 they’re going to need 3D and BIM, but how do they get to that point without being enabled? And what else do they need to do to develop, in order to become a supplier?

“So those are the workstreams. But we’ve gone further than that, we’ve got six cross-cutting themes where we’ve got really serious questions. For example, we’ve got a cross-cutting theme on a single-railway strategy, because you can’t have two strategies, they all have to join up with what RDG and Network Rail are saying is strategy. It’s all got to be one strategy, brought into the supply chain.”

Taking time to do it properly

That’s quite a bit of work that has been carried out. How was it done with a team of only 15 people (11 excluding Government)?

“With so few members it was quite a task, but we can bring in help from outside for the working groups.

“Indeed, we were even advised by BIS, through experience, that smaller is better. Some councils have as few as eight members. All the other councils, by the way, have the same issue of having representative bodies working with them, so the automotive council works with the SMMT (The Society of Motor Manufacturers and Traders) for example.

“We were warned that we are going to make mistakes to begin with, and advised to keep it a bit loose so that we can adapt and not just stubbornly stick with something that doesn’t work well. And we were told to take our time as we’ve really got to get this right for the industry and it shouldn’t be something that just pops out as an answer in a small brochure. So we’ve had over 50 meetings, building and refining what we want to do, how it’s structured and how we operate.

The Secretariat (RIA and the Rail Alliance) has been wonderful in producing a planner, in getting people together. We’ve had several councils now with the Secretaries of State present, giving them updates on where we are, what we’re thinking and so on.“

Already making an impact

Has there been any contact with the existing strategic industry sector councils, to take advantage of their experience?

“We’ve had all the other councils from the other strategic sectors make presentations to us on their good, bad and ugly and what we should avoid. They’ve attended our presentations and they’ve even adopted one or two things we’ve had as ideas.

“The best one so far is the SME pilot scheme. This is the big companies nurturing small companies under an arrangement which disallows advantage. So, in other words, an SME would sign up in a binding way with a leading company, which would take them under their wing for a year and help them in specific areas of their business, using all the facilities available to the big company. It could be process support, in the way that they run their business and manufacture things. Or, if it was exports, advice on how to make a product saleable overseas. Or it could be anything – a quality system, health and safety, or even the know-how on contracts. So we sign up and, in good faith, lend a year of our time with the resources needed, including a board director, to bring the SME along.

“As an idea, it’s been taken up by two other councils and has been referred to Cabinet office level by BIS as an example of good practice.

“In each of the sector councils we found a different construct that wasn’t there at the beginning, that’s had to be created by the private side and, in its maturing, has become an enabler. So could we have done an RSG council before there was an RDG?

“I don’t think so, because the fragmentation of the industry had become so wide, so shockingly separated, that there was nothing cohesive about any of it. Without the RDG pulling the TOCs together it wouldn’t have worked.

“Leaving aside Government, we have 11 good and representative members, all CEOs of their respective companies. I am chair (Alstom). Then we have Carillion and Amey (infrastructure), Porterbrook (ROSCO), RDG (represented by South West Trains – TOC), Perpetuum (SME), Siemens (Signalling), Hitachi (train manufacturer), Atkins (designer) and two customers – HS2 and Network Rail.

“We launched our Vision Statement in January. Now we have to write a strategy, which will be supply-chain focused because that’s the nature of industrial strategies, that the TOCs and Network Rail and the Government will sign off to. And we want to have that ready for the first 100 days of the new Government, whoever they may be.”

The new Rail Supply Group seems well on the way towards becoming the twelfth strategic sector. All it needs now is our support.