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Fourth Railway Package – Technical Pillar – what it may mean for the UK rolling stock market

“Let a hundred flowers bloom” Mao Zedong

Unsurprisingly unnoticed by a press dominated by the big themes of the UK’s relationship with Europe, the European Parliament on 28 April approved the European Council’s common position on the so-called “technical pillar” of the Fourth Railway Package.

While this may seem to some another instance of Brussels gobbledegook, what it signifies is that progress is being made towards harmonising safety authorisations across Europe for signalling equipment, rail vehicles and rail operators, all under the umbrella of the European Rail Agency which will gain powers over national rail safety authorities though not supersede them (in the UK, the ORR is the relevant authority).

This article examines the potential impact of the above on the UK rolling stock market, one of the most dynamic such markets in Europe.

The seemingly relentless expansion of passenger numbers on the UK rail network as well as the phasing out of diesel rolling stock on lines being electrified has created a strong and continuing demand for new rolling stock in the UK. With only two existing rolling stock manufacturers with factories in the UK (Bombardier in Derby and Hitachi in Co. Durham), both of which are in any event part of globalised rail equipment suppliers, it has been inevitable that rolling stock has been sold into the UK by European manufacturers building such stock in Belgium, Austria, France, Germany, Spain etc. The unit cost of such rolling stock has been inflated by the need to re-design standardised European products to meet UK safety requirements and network constraints.

The European Commission estimates that as a result of the adoption of the technical pillar of the Fourth Railway Package, the time taken for rolling stock approvals in any EU country will reduce by 20% by 2025 saving an estimated Euro 500 million across the EU.

What effect might this have in the UK? Well of course that depends partly on the decision the nation makes on the 23rd June – but if UK does remain in the EU, the easing of the financial burden of obtaining approvals may tempt other smaller European manufacturers to bid for UK rolling stock tenders e.g. Polish, Czech or Hungarian manufacturers. While homologation to UK standards is less burdensome than it was and the larger manufacturers understand the process well, it may still discourage new entrants especially where the number of units in the order is relatively low.

More competition for rolling stock tenders is to be welcomed as some commentators have described an effective oligopoly as having developed with the great majority of UK rolling stock orders being shared out between Bombardier, Siemens and Hitachi, although recently CAF of Spain has obtained some significant orders and there are signs of increased appetite to bid from other new potential entrants to the market. The fact is that not all rolling stock orders require products that are at the cutting edge of rail technology and, for certain rail lines, what matters more is reliability, ease of maintenance and general affordability. So for instance for remaining diesel lines or regional lines, there seems to be no reason not to spread the net a bit wider in order to procure the DMUs or EMUs of the future.

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