But is Brexit really to blame for changes in the cycle of manufacturing?
“There was always a nod and a wink on contract talks, that you had to have a UK manufacturing facility or at least get supplies from UK companies,” said Tammy Samuel, partner at law firm Stephenson Harwood. “That is not currently allowed under procurement regulations. It still won’t be allowed following Brexit, unless we start repealing legislation.
“If that does change as a result of Brexit, with new weighting towards domestic manufacturing during evaluation of bids, then it could lead to UK firms getting more orders or newer ones following the Hitachi model of building a final assembly plant. It could therefore encourage inward investment.”
Martin Fleetwood, a board member of UK Tram, commented that Brexit has coincided with a policy shift towards more new rolling stock. Britain is moving away from refurbishing older trains.
Tim Durham, whose job at Macquarie is to finance rolling stock deals, agreed that the shift had started before the Brexit debate. He thought the decision to leave the EU would not produce a radical change.
“There was a change in franchise specifications to have a more qualitative scoring bias towards new trains,” Durham explained. “There are more new trains than anyone expected. At the same time there is cheap financing worldwide. So the combination of more trains, cheaper trains and cheaper money means that buying new is cheaper than refurbishing old trains.
“It is a macroeconomic thing, not a Brexit thing. Remember Hitachi are doing final assembly here, not manufacturing, and they built a site for one specific order. It will be interesting to see what Siemens do. They consider the UK a home market - they are not a big supplier in Germany. Will they feel forced into following Hitachi?”
RSSB Managing Director Mark Phillips responded that there is a limit to how much more rolling stock is likely to be ordered. A couple of big contracts are on the horizon, but then it would tail off, he said.
“If you are not already here, and you are only going to win one in every three or four bids that you submit, that is a big investment to overcome when the pricing is very competitive.”
Chris Jackson, head of transport sector at lawyer Burges Salmon, felt there was much to lose if the competition for contracts openly favoured companies manufacturing in the UK.
“A genuinely liberalised market has been maturing here over 20 years. It is not the only liberalised market. But it is the most advanced. It is not perfect, but the competition is fair.
“That is a huge strength because companies will want to continue to be part of it. The problem will occur if the procurement and state aid rules are amended specifically to build in a home preference. That starts to undermine the credibility of what is a trusted market at the moment.
“That central trust element is very important, and Brexit could significantly influence that.”
RAIL INDUSTRY PERFORMANCE:
(DRIVEN BY MIGRATION?)
During the referendum campaign, the issue of migration dominated the Brexit debate. Yet during the panel discussion it was barely mentioned.
Chris Cheek, of The TAS Partnership, wrote in the partnership’s latest Rail Industry Performance report that changes in migration rates may have a significant impact on rail. The UK rail market is dominated by London, which also has a disproportionate amount of national inward migration.
“The recent strong growth in the population caused by both migration and a recovery in the birth rate has undoubtedly had an effect on the demand for transport, particularly in London,” he wrote.
“Since the privatisation of the railways in the mid-1990s, the population of the UK has grown by more than 7.4 million people, a rise of 13.3%. Greater London has grown by over 1.5 million people, a 22.5% increase.”
According to ONS Labour Force Survey data (see graphs above), the number of people employed in London has increased by almost 1.4 million (more than 40%) over the same period. So a change in the rate of migration could influence rail in London at a rate approaching double that of the nation as a whole.
Cheek said: “According to our latest report the private sector train operators made between them an operation profit of £273 million in 2014-15. That was on a total turnover of £10.9 billion, and represented a margin of 2.5%. It represents just 16.5p per journey out of the average fare of £5.32.
“Between them the operators paid a net £659m into the Treasury in premium payments for the rights to run the trains. So the Government earned twice as much as the operators.
“This is a different picture to the one painted by politicians and the media. There are deep-rooted industrial relations issues and ongoing capacity problems. But these will not be solved by changing the ownership or by other wholesale reorganisation of the system. Government still controls many aspects of the network, including regulated fares, service levels, rolling stock policy and investment levels. It owns the infrastructure, too. People need to know that these issues are already settled in Whitehall.”
