On 3 January 2018, the London Assembly Budget and Performance Committee sat down with TfL to go through their current budget. Discussion largely focused on the various pressures on TfL’s finances – from the removal of TfL’s government grant, to fare freezes and falling advertising revenues.
About two and a half hours in, however, Assembly Member Caroline Pidgeon asked a question: “In here, there’s a line… £850m capital receipt… what exactly is this?”
The reply, from Simon Kilonback, TfL’s Chief Finance Officer, sent eyebrows at LR Towers skyward:
“So this capital receipt relates to how we finance our rolling stock… we have decided in this business plan to press ahead with the procurement of the new Piccadilly line rolling stock and we will be looking to award that contract in the first half of 2018.”
“We’ve therefore made a decision about taking some of our existing rolling stock and doing a sale and leaseback of that, to finance the Piccadilly line rolling stock.”
The outrage begins
Clearly, we were not the only people who had been watching the Committee. An hour later, an article appeared over at ITV:
Cash-strapped transport bosses plan to sell part of the London Underground fleet and lease it back to raise money for new tube trains.
That piece picked up on Pidgeon’s own in-Committee response the admission:
You’re going to be selling and leasing back rolling stock you’ve already got, that you wholly own, in order to give you the cash to buy new rolling stock? It sounds quite mad.
The Evening Standard (“TfL plans to sell part of its London Underground fleet of Tube trains”) and others were not far behind, nor was social media.
All these stories shared the same source – Kilonback’s statement – but they also had one other thing in common: they weren’t actually true.
Kilonback’s statement was very carefully worded – something that most of those watching seemed to have missed.
The reality is that TfL don’t plan to sell any London Underground trains. That would indeed be rather mad.
They plan to sell (and lease back) the Elizabeth line fleet.
Why the Piccadilly line matters
For a number of years we have reported on the problems facing the Deep Tube Upgrade – rather theatrically (and inaccurately) called ‘New Tube for London’ under the previous mayor. We concentrated on the technical issues the upgrade involved, why it was needed and the challenges it presented. It is a huge project, involving the upgrade of both signalling and trains across the Piccadilly, Bakerloo, Central and Waterloo & City lines at a cost that will likely equal the money spent on Crossrail by the time it is complete. As a result, we were not surprised when delivery dates started slipping.
When the Sub-surface Railway (SSR) signalling contract was cancelled, Deep Tube’s dates slipped further. The failed contract had been retendered and the winning bid (in fact the only bid) was more expensive, although at least this time the company providing it – Thales – had a good track record (pardon the pun) in this area. It made sense to assume that the substantial additional cost of this resignalling project would inevitably lead to unrelated follow-on schemes being delayed, not least to avoid a considerable cash flow problem.
Despite this, there seemed little reason to worry about Deep Tube’s financing. Once the SSR signalling upgrade is complete there are otherwise no really big (multi-billion pound) projects on the horizon that are explicitly signed off. There is still the dream that the Bakerloo Line Extension will happen and there is also the bigger issue of Crossrail 2. In both those cases though, separate funding-streams are being sought.
Indeed, one reassuring thing that came out of the cancellation of the short-term purchase of new Jubilee and Northern line trains was David Hughes, LU’s Director for Strategy and Network Development, telling the London Assembly Transport Committee that the cancellation helped ensure money was available to buy new trains for the Piccadilly line – trains, which he made clear, needed to be replaced as soon as possible.
Finding the money
Hughes’ comments were a relief because they seemed to address what remained one of Deep Tube’s biggest risks – that TfL wouldn’t be able to find the money to get things started. That cash is necessary because you can’t just buy Underground trains off the shelf. They tend to be bespoke. This isn’t a problem for most rolling stock suppliers in terms of construction, but it means that designing and building them isn’t without risk. As a result, the manufacturer tends to ask for an awful lot of money up front – or at least over a very short period of time.
As we’ve already mentioned, this lack of cash was one of the reasons behind Deep Tube’s earliest delays. Paying for the SSR upgrades depleted TfL’s petty cash jar. What was unanticipated, however, was that subsequent events, the general economic situation, grant changes and manifesto promises would prevent this from being topped up once again. Indeed TfL’s finances are still clearly under considerable pressure, something that the January Budget Committee laid out in stark detail.
In better times, this wouldn’t be a problem. In recent years, a favourite refrain of politicians (and amateur planners) with a transport project to push has been that TfL can leverage it’s size to borrow on favourable rates. To a certain extent this is true, but it’s also an oversimplification.
It is true that TfL has a good ‘credit rating’ – AA (Standard & Poor’s), Aa3 (Moody’s) and AA- (Finch) – but they are also subject to strict borrowing limits imposed by the Treasury. And as they laid out plainly in their recent refusal to build the Metropolitan Line Extension without further funding – they are very close to maxing out that limit.
Although this may seem like a perilous situation, this lack of ready cash probably isn’t causing too many sleepless nights at TfL. Indeed one is tempted to suspect that any jittery young TfL accountants will have been gently reminded that things used to be considerably worse. When the Underground was renationalised, its cash reserves were so low that it rarely had enough in its current account to make it through the day. For some time, the solvency of the world’s oldest metro system rested entirely on daily, semi-formal lunchtime chats with the financial people over at the Greater London Council (GLC). After each lunch, the GLC would remit enough cash over to cover the day’s bills.
Today’s situation is far less seat-of-the-pants. At the end of the last financial year TfL actually had just shy of £2bn in the bank. It’s just that this is already earmarked for use elsewhere (£500m of it is Crossrail money, for example) and – without the ability to borrow either – this is preventing TfL from doing the one thing they like to do – buy their Underground trains outright.
Owning your own trainset
If you are TfL (or, more specifically, London Underground) then there are considerable advantages to owning your own fleet. The biggest of these is that – for what is practically a bespoke product – it is considerably more financially attractive than the usual alternative – leasing.
If you want to lease something – be it a car, plane or something else – you quickly learn that the lessor will normally be very careful not to put himself in a position where he loses out if you stop paying.
First of all, there will be a clause that the goods remain the property of the lessor until they are paid for in full. Secondly, there will be a requirement to lease the goods for a minimum period of time – basically to cover the early period where the value of the goods drops faster than the payments received. Thirdly, once the lessee is free to terminate the lease, the lessor will try to make sure that there is some residual value in the product throughout its life and that this is greater than the sum of payments still due.
This is fine if the product is a car or standard production aeroplane. It doesn’t really work though if the item is bespoke – such as a Tube train. Put simply, if your only post-London option as the Lessor is the Isle of Wight, then you don’t really have another option.
It should quickly be apparent that a train lessor is going to be very wary about leasing Tube stock unless very strict terms are applied. And, if they naively think that nothing will go wrong leasing vehicles run by TfL, they only have to remind themselves what happened when a different mayor decided he didn’t like bendy-buses.
This is not to say trains on the Underground haven’t been leased. Most notably TfL actually lease the current Northern line trains from a Special Purpose Vehicle controlled by Alstom, a legacy of the disastrous PFI period. This lease is a little bit different though as, unusually, Alstom also maintain the trains as part of the lease. Indeed we suspect that in this instance that arrangement must be working quite well and the terms, set up a long time ago, are actually quite favourable to London Underground. Certainly they didn’t exercise the contractual break clause when they had the chance.
Despite the apparent success of the Alstom leasing arrangements, London Underground mostly looks after its own stock without outside help. Caroline Pidgeon suggested that not doing so would be ‘quite mad’ and TfL would, in most cases, be the first to agree.
Wombling free…
What makes little sense underground, however, can make a lot more sense over it. With far more commonality in fleet design on the surface, the options for re-leasing there are much greater and thus there is less risk (and cost) to be passed on to the lessee. This makes it a much more economically viable model and so there, like any other Train Operating Company (TOC), TfL have not been afraid to lease.
This still isn’t to say that they do things the same way as everyone else. On the national rail network, the leasing market is dominated by a relatively small number of companies known as the ROSCOs (Rolling Stock leasing Companies). When TfL found themselves in need of a fleet of trains to run the newly-acquired Overground, however, they couldn’t just turn to a standard deal with one of the traditional big three. This was because TfL (stop us if you’ve heard this before) wanted something a bit different: in this case high-capacity, walkthrough trains with longitudinal seating – something practically unheard of on the national network at the time. They also didn’t want to be tied into an excessively long contract. The huge amount of infrastructure work (both in terms of stations and electrification) meant they could easily see a future where they wanted more cars or even different power supplies. They needed a fleet arrangement flexible enough to support that.
The traditional ROSCOs weren’t entirely enamoured with this proposition. They looked at the high capacity setup TfL wanted from Bombardier in the Class 378s and they saw something that was thoroughly untransferable or (just as bad) unconvertable. The door arrangement would ensure that a large vestibule would still remain if they wanted to put 2+2 seating in and all the electrical control equipment would have to be under the seats – something that would normally be at the carriage ends. That would need relocating. Today, that setup is considerably more attractive (more on this later) but back then there seemed very little certainty of being able to re-lease without major expenditure.
In the end, two of the big three ROSCOs submitted bids, but presumably their price wasn’t seen as competitive enough. In the end, TfL looked to two helpful banks, Sumitomi Mitsui from Japan (one of the world’s biggest asset leasing companies) and National Australia Bank, who formed a hands-off leasing company – QW Rail. Each contributed roughly 25% to its formation whilst the European Investment Bank (EIB) loaned the rest. The final loan repayment to the EIB is due in 2027 with the funding from the two banks repayable in 2044 (by which point the original stock will be 35 years old).
The resulting arrangement was one that, in like-for-like terms, seemed less beneficial than a standard lease to many in the industry. It was on the terms that TfL wanted though. Since then, further leasing deals have followed on the Overground – including more standard leasing arrangements for the Class 172s used on the GOBLIN, which will be the first Overground stock to be cascaded elsewhere.
All of which brings us back to the Elizabeth line (nee Crossrail).
Leasing Lizzie
To a certain extent, one of the things that made the Elizabeth line’s Class 345 trains (now mid-rollout with TfL Rail) unique was that they weren’t leased. This was largely because TfL were in the (relatively) luxurious position of not having to do so. The money was there in the project and (at least at the time they began shopping) the Overground-esque layout they desired was something which still made the traditional ROSCOs suspicious. Taking all that into account, owning the rolling stock wasn’t just playing to TfL’s preference, but also taking the path of least resistance.
Kilonback’s statement at the Budget and Performance Committee, however, shows just how much that situation has changed.
The simple truth is that TfL now find themselves needing to build two new train fleets – one of which they are currently deploying, the other which they are about to tender for – whilst only being in a financial position to outright own one of them. Owning the Deep Tube fleet (or at least being able to pay for it up front) is a “must”, whilst owning the 345s has only ever been a “nice to have”. So it seems they plan to give up the chance to do the latter to do the former.
Scoping the contract
Of course with the Elizabeth line fleet already specified, detailed design work completed well over two years ago and almost 40% of the fleet already built, this means that the leasing deal will be far from a standard ROSCO arrangement once again. With a maintenance deal for the Class 345s already signed with Bombardier for up to 32 years, there is also far less opportunity for an ongoing technical and management role from an interested ROSCO too. Essentially, many of the elements of a conventional leasing deal have already been specified and will be managed and undertaken by Bombardier as part of their maintenance role (for example corrosion repairs and repainting).
All this means we are likely to see TfL continue in their role as the hipsters of train leasing (“your favourite ROSCO sucks”) and are unlikely to see one of the traditional big three ROSCOs take part in the financing – unless it is as part of a syndicate, providing rail expertise which the other members might otherwise lack.
Indeed all of the traditional ROSCOs will be feeling some financial pressures over the next few years, as the leases on various existing stock they own begin to come to an end with limited signs of renewal, for a variety of reasons. These include both the ageing out of some of the UK’s most familiar rolling stock but also – somewhat ironically – the fact that TOCs across Britain are increasingly asking for the same style of high-capacity trains that can now be found on the Overground. Unfortunately for TfL, being able to say “we told you so” doesn’t get you a ROSCO discount.
My first ROSCO
With big ROSCO budgets tight, the purchase and lease back of the Elizabeth line stock is, in many ways, ideally suited to a more hands-off investor or, more practically, a group of them, given the £875m that TfL are looking to raise. This is more than most potential investors would be willing or able to consider on their own.
Indeed the Elizabeth line rolling stock would be the ideal candidate for one or more new (or relatively new) players, and one suspects TfL might be pitching it as such to the market. With many trains already completed, in service or involved in testing and the new signalling and other systems included in the Crossrail project, the risk involved is far lower than for an early stage investment in the first order of a new rolling stock class elsewhere.
This means there is no need for the complex project or structured finance (equity and debt) type deal seen on Thameslink – which ultimately involved three private equity investors (one of whom was Siemens’ own private equity arm), a whopping 19 lending banks and two years of negotiations post-contract-award. As a side note, the Thameslink lenders included TfL’s own reliable standby lender – the European Investment Bank. Indeed the fact that the EIB will shortly no longer be available to TfL (or any UK body) as a source of relatively cheap finance may well be another factor playing into TfL’s decision to sell and lease the 345s. As with rail devolution, Brexit is perhaps once again proving to be a reason why London can’t have nice things.
The good news for TfL is that in the last decade a number of organisations outside the traditional ROSCOs have entered the great leasing game, often outlining their grand plans in press releases that start with the phrase “The first of many…” In most cases, it actually proves to be their last deal as well as their first and they often exit the market when a suitable refinancing or portfolio sale opportunity arises. So far only three new organisations have actually done multiple deals in a significant capacity. Two of those are likely to prove the potential models for the investors in Elizabeth – or may actually invest themselves.
Indeed one possible candidate is TfL’s old friend from the Overground – Sumitomi Mitsui (SMBC). They entered the UK rolling stock market in an attempt to diversify their asset holdings and have – by most accounts – been happy with the result. SMBC have been lending to the Japanese railway sector for decades, typically acting as the lead investor (and lender) in a leasing syndicate. What marks them out from the traditional ROSCOs is their ability to re-partner with the most suitable other investors at any given point in time. ln the UK this allowed them to quickly move beyond the Overground, becoming one of the many parties involved in Thameslink as well as various Scotrail orders. Crucially for TfL, SMBC seem to have got a real taste for oranges – they recently returned to London to fund the Overground stock that will soon enter service on the recently electrified GOBLIN, Watford and West Anglia Overground routes.
Another potential investor model is that of newcomer Rock Rail, which has been able to raise significant funding from pension funds and insurers (as well as a small number of banks who wish to invest though remain hands-off). Some of this is the result of pension fund mergers, which make the size of rail leasing deals a better investment for larger funds as well as changes in financial regulation.
The finer details
Any sale and lease back deal may also have to including financing for the options on additional Elizabeth line stock that Tfl have yet to take up (they have until 2023 to do so). This will inevitably make any deal more complex, as additional provisional funding will need to be arranged, despite the fact it may never be used.
This flexibility will add extra cost on any leasing deal, so the suspicion here at LR Towers is that TfL are currently mulling over a number of choices:
- Include the options as part of any sale and lease back
- Finance the options separately if (or more likely when) they decide to take them up
- Decide right now to take some or all of the options up, so they can factor them into the current deal.
The flexibility of the first choice will carry additional cost and the later requires TfL to make choices about increasing service levels before the Elizabeth line has officially opened. That said, the likelihood of TfL taking up some (or all) of the unused options is high, with the Elizabeth line’s western turnback station moving from Paddington to Old Oak Common when HS2 opens in 2027 and the possibility that the Elizabeth line might end up being the main operator of services on the new Western Rail Link to Heathrow (WRLtH) – that rare thing on which both Chris Grayling and Sadiq Khan agree.
Counting the readies
The key points of interest, of course, are what this raises for TfL up front, and what it’ll cost them over time. Kilonback confirmed that they are looking to get £875m from the deal in their 2018-19 financial year (which runs April – March). That should cover the cost of the Piccadilly Line stock at least. Whether it leaves much for additional work required as well though remains to be seen. If it does, one suspects it will not cover the full cost and the bulk of the money for the infrastructure on the Piccadilly line – including resignalling costs – will have to be found from elsewhere.
£875m is close enough to the price TfL paid for the Elizabeth line rolling stock that it suggests TfL are valuing the stock ‘as new’, even if the order was placed four years ago. This is not as weird as it sounds – the fleet is still mid-rollout and the devaluation of Sterling against the Euro and other currencies, as well as other inflationary costs since the original deal was signed, mean that the cost of purchasing identical ‘new’ rolling stock today would be up to 12% higher anyway, based on other recent deals.
Depending on the length of term TfL is looking for (presumably 20 – 25 years – which suits many current investors), where ownership would reside after the end of that term, and given that the associated risk is relatively low, the betting here at LR Towers is that TfL will probably end up paying out £55-80m a year in leasing costs, as a result of this deal. That will put total leasing repayments at 50-75% more than the sale amount.
On the plus side, that puts the repayment costs well within the projected Elizabeth line operating surplus, but it is tempting to wonder what TfL had that slice of money earmarked for originally.
Needs must
Whatever it was, it won’t be happening now. But it is hard to see a world in which kicking off the Piccadilly line upgrades wasn’t likely more important. Certainly, TfL seem to believe so or they would not be doing this at all. Selling and leasing back the 345s is a pragmatic solution to a problem that must be solved. It is not ideal, certainly, but it hardly warranted the burst of outrage Kilonback’s statement seemed to provoke.
Indeed much of that outrage seemed to rest on a fundamental misunderstanding of how rail leasing actually works, or at least how prevalent it is (currently over 90% of UK rolling stock is managed by one of the big three ROSCOs).
In recent months, it has increasingly seemed that a new class of railway purist has begun to emerge alongside the traditional crayonista. Rather than drawing lines on maps, however, the renationalistas seem determined to reduce all rail decisions to questions of ideology. As with the debate over nationalisation, how rail leasing might work here is a far more complex one than those on both sides of the political spectrum would like most Londoners to believe. Ideology is a wonderful thing, but pragmatism builds railways or – in this case – buys trains.
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TfL’s balance sheet is creaking and it’s up to the limit in terms of debt. Silvertown Tunnel is likely to be a PFI because of this.
The organization has got the added pressures of:
* Fares Freeze – with RPI rapidly accelerating
* Nil operating grant. TfL is not just LT with a different name – it also has highway responsibilities. So TLRN maintenance has to be funded from TfL’s fares and congestion charging income. Plus funding to the boroughs.
The sale and leaseback of the Class 345s is a sign of how squeezed the organisation is.
This is not sustainable.
This sounds like an eminently sensible idea by TfL. Given that Crossrail is effectively part of the national network that just happens to have London Underground characteristics in the middle, why not have leased rolling stock like everybody else on the network if it gives you some useful spending money!
BTW, there are a couple of small errors I spotted:
“Once the SSR signalling upgrade is complete there are other no really big (multi-billion pound) projects on the horizon”
The “other” should be an “otherwise”.
“…ideally suited to a more hand off investor”
Should be “hands-off”.
Also, should the statement:
“As with rail devolution, Brexit is perhaps once again proving to be a reason why London can’t have nice things.”
include a link to the article “Overgrounded” for the benefit of people who don’t know why Brexit derailed devolution?
[First two corrected. I have left the link out. Rightly or Wrongly,I have decided on the basis that anyone who is that interested will have already read the article. PoP]
Sorry to ask an obvious question but TfL have actually confirmed to LR that the 345s are the subject of the prospective deal?
Is sale-and-leaseback just borrowing by another name? Presumably it costs more than borrowing from the bank, as there’s the (small) risk that TfL might exit from the lease early. In which case, isn’t this just a failure of politics in setting an arbitrary borrowing ceiling which requires this expensive workaround?
To ask another obvious question, given that it would have been blindingly obvious that the wording of the original statement would (a) be misinterpreted as referring to Underground stock and (b) would as a result cause a media storm, why on earth not clarify at the outset that it’s the Crossrail fleet involved?
Re: Frankie Roberto – I’m no expert, but there’s an essential difference in terms of asset ownership between sale-and-leaseback and borrowing. Whether this balances out your perception of increased cost I will have to leave to others.
Walthamstow Writer 17:53,
Yes.
Balthazar 19:35,
Almost certainly because TfL did not want to reveal more at this stage. In fact, we strongly suspect they would have been much happier if the issue had not come to light at this moment. For the same reason, we suspect they were not at all anxious to correct inaccurate reports that quickly circulated.
Its not a case of them not wanting the information to come out but that various protocols normally adhered to meant they would rather the information had not come out yet.
Re Frankie Roberto,
Most UK rail leasing (everything except LO stock) are Operational Leases and the assets sits on the Lessors balance sheet (i.e. the ROSCOs), with the LO stock TfL went for Financial Leases (for a lower interest rate compared to Operational Leases but much harder to find people to lend to you) where the assets sit on the Lessee’s balance sheet (i.e. TfL’s). Financial leases are increasingly being viewed as plain borrowing in disguise with changes to accounting rules internationally and HMRC are currently consulting on the aligned tax changes to financial leases to take place in April 2019. As a public body TfL don’t have to care about the tax implications in this case. Financial leases are only really suitable for public bodies (TfL / Merseyrail /Glasgow Subway and light rail operators) as they have a long enough guaranteed life unlike franchised National Rail operators.
Sale and leaseback is a very common way of realising asset value, especially where commercial buildings are concerned. I do recall the outcry though when my local council announced it had done a S+L deal on all its street furniture (lampposts, bollards, etc). Time for some NPV calculations!
“Put simply, if your only post-London option as the Lessor is the Isle of Wight, then you don’t really have another option.”
Well then, an obvious though not short term option is to expand the IoW network, so that it becomes the natural cascading outcome for second-hand tube/SSR trains…
“A firm called London Transport
said Things don’t work as they ought.
So LoB guided them right,
to the Isle of Wight,
to the perfect railway they sought.”
The failed SWT bid to retain the South West franchise included, I’m told, D stock for the IoW.
Unfortunately the DfT didn’t want the solution in the answers to its ITT, just the willingness to do something/anything…
How about Ryde-Gosport-Portsmouth as a means of ensuring permanent tube train demand?
Anomymice 2134: I doubt it. The reason tube profile trains are used on the IoW is because of a really small tunnel or two. Main line stock is too big to fit through. Thus as D stock are bigger than most national rail stock, it might not have been a smart move to plan to use it on the IoW.
@anonymice = apart from the loading gauge issues, reopening anything useful of the former IoW network is going to be expensive – the key part of the network was the approach to Newport,where the alignment is now occupied by a retail park.
@AlisonW and others – the point of sale and lease back is to improve cash flow = swapping long term payment liabilities for a short term cash boost. In the world of DCF, this makes perfect sense. The problem, of course, is that when you actually get towards “the end of time” for leasing purposes, you find that you are faced with larger cash requirements than you’d otherwise have faced. meanwhile you have spent that cash boost on something else, years ago.
(as well as a small number of banks who wish to invest *through* remain hands-off).
Do you mean though?
[Yes. Corrected. Ta. PoP]
@ Balthazar – TfL made it clear at the meeting that as negotiations were ongoing they were limited in what they could say. I agree with PoP’s observation that TfL would have preferred that they hadn’t been asked the question at all. The lack of formal clarification to the “media storm” suggests they just hunkered down and waited for the one day political and media froth to pass by. They could then just carry with negotiations. I dare say we’ll get a press release at the point a deal is done and all signed off by the relevant parties. I do wonder, in passing, whether the DfT have to consent to the deal as they are joint sponsor and funder of Crossrail so are certainly an interested party. There may also be a Board Paper but I expect it will say next to nothing as such papers usually do on “controversial” matters.
It is worth saying that a “sale and lease back” arrangement is being done on 55 Broadway too. There was a Tfl Board Paper on that several months ago. That represents a change from the former plan of flogging the place off and conversion into posh flats.
Just to set the record straight, the main reason why the IoW uses tube trains is the Ryde Esplanade tunnel. The floor of the tunnel was raised when the line was electrified because of flooding issues. As such it is now only tall enough for tube stock.
Seems fair enough. It’s a shame TfL need to resort to hocking their newest stock but it’s probably the best option given prevailing circumstances and political choices (on all sides)
Re: Anonymice 21.34 – thank you; a genuinely hilarious ironic post. Made my day! Lovely to see that some people have actually taken the bait!
NGH referred above to the prospective change in accounting treatment (all operating leases will go on balanced sheet for operators with a corresponding liability for the capital element of the future lease rentals.)
Will this be reflected in Government accounting? Ie all PFI going on balance sheet?
The 345s would remain on TfL balance sheet in this case, and would the lease creditor be taken into account for TfL borrowing limits?
Leasing, pawning, mortgaging, hire purchase: call it what you like – these are all secured loans, The Treasury sets rules on how much money can be borrowed by the public sector, and I would not be particularly worried if this scheme gets around those limits, unless the interest rates are higher.
There is one question though – the security of the borrower: in a leasing arrangement the lender owns the asset. If the lender itself goes bust, can its creditors foreclose? Where does the lessee stand then?
Re Timbeau,
Provided the Lessee keeps making the payments the creditors can’t foreclose (As a parallel example see Lehman Brothers taking into the 2040s till the final dust settles for example). Which bank account the payments go to in the longer term may change.
Re WW,
They do. Finding a minister to have the conversation with might be fairly hard given the musical chairs at the moment (there can’t be a like for like minister swap as one of the new incumbents has a slight conflict of interest with a large transport project round the corner from where they live so responsibilities and roles will have to be reallocated between the 4 ministers).
Re Verulamus,
The key test would be whether the PFI is a lease or not (i.e. it is a service provision rather than asset provision). PFI is effectively loaded with plenty of services and risk* to hopefully make sure it would be very hard to reclassify onto the Government balance sheet in the future.
*The risk element is being diluted (unless fairly sophisticated see IEP) but the service provision element remains.
All this talk of leasing & financial security & government ( Ministerial ) consent, raises another presently hot topic. The major contractor for a lot of government work, including some in London ( like HS2 ), Carillion, appears to be in very deep trouble.
Could be “Interesting” in the usual unpleasant sense.
@ngh – and therein lies the rub; a fair number (maybe most) PFI schemes have either had somewhat contrived risk transfer mechanisms,simply to slide under the definition of a lease, or – worse – have mismatched risk transfer with management control,which prgrammes failure into the deal. (Mentioning rail franchising at this point would be simply indecent. )
Re Graham H,
And there in lies just over half of the Carillion problems where things went very wrong very early on into the building stage before any service element has take place with no chance of recovering the cost overruns that occurred before even half way through the build. Their conventional non PFI projects in the UK seem to be largely profitable. (but not hyper profitable and hence the lure (and risk) of PFI).
@ngh – personally, I blame the greed and naivete of the bidders, having had to answer such questions (anent the TLK stock bid) as “What do expect the UK rail to be in 20 years’ time?” or “Couldn’t the drivers drive less fiercely?” (in relation to cooling the tube as part of a PFI bid. Oh, and then there’s amateurism – a friend who ran the credit committee of a major lender recounts a meeting to discuss a loan for a power station in New Zealand, at which the chairman of committee went to sleep, and on waking u, asked how many sheep there were there.
@Timbeau this is precisely my point. Presumably the interest rates on the lease will be higher than straightforward borrowing, given the additional risk that TfL decide to exit the lease early. In which case this arrangement would be costing more purely to get around the borrowing limits, which the Treasury could just raise instead.
Oh for an edit function!
Reminds me of a recent learned lecture about the Bordeaux LGV. Much trumpeting by the French government that it was privately financed. On closer examination, virtually all the money was provided by or guaranteed by state institutions
Re Frankie @ 1641,
But the point is that TfL effectively can’t decide to exit early.
The interest rates on a Operational Lease are higher than a Finacial lease given everything else being equal (which it won’t be) but TfL prefer the financial lease route they have gone for on the LO stock any way. The lowest risk tier of borrowing on the LO stock was just 3.3% and the higher at 4.7% which isn’t exactly expensive. Many National Rail franchises are paying circa 6% on an Operation Lease basis to reflect the risk you highlight.
Leasing repayments 50-75% more than the sale – is that cash or real? And what would be the effective APR?
Re Christian S.
Real with rates between 4.5 to 6.5%, varying terms and residual values at the end of term uses for the circa 30 scenarios I modelled.
NGH – thanks! In my view that’s not too bad for AA/AA-. On the other hand it looks too high if the risk is as low as described in the article.
Or to put it differently, quite a lot of money to be paid out just to make sure this loan doesn’t show up as government borrowing…
@ChristianSchmidt – rem acute and all that – I haven’t actually come across a PFI scheme which was good vfm -for the reasons you state.it was always and only about getting the goodies now for no increase in public expenditure. The arguments about getting economic and social and efficiency benefits now rather than later, were so much window dressing. I have not seen any thorough before and after studies (may be no one felt brave/foolish enough to do any follow up on these softer benefits), but the radio silence on the subject is telling.
There are PFIs/PPS where there are clear benefits – e.g. when the client lacks expertise to control the risk but the contractor can, and/or where it is the best method to ensure the contractor keeps long-term maintenance in mind. Rolling stock for franchised rail operators is actually a reasonable good example (or would be if the Rosco’s would be so risk averse), rolling stock purchase+maintenance contracts are another. In fact many German state rail authorities seem to be doing well with such arrangements despite being able to purchase stock outright.
But TfL doesn’t lack expertise, the stock is in production and long-term maintenance is sorted. Thus it is an expensive loan.
I’m not sure I agree about the suitability of rolling stock leasing. In the UK, at least, for many decades until recently, the market has been the opposite of liquid and it’s far from clear that there were any risks to be transferred. As one ROSCO finance director said to me at the time of setting them up, whilst rubbing his hands “we are simply buying a gilt”. And so it seemed – Stagecoach’s returns on rail were 6-7%,buses 12-14%,ROSCO 27%.
I agree that the market has become more liquid suddenly with the taxpayer paying to throw away the new SWT deliveries, but such liquidity comes at a cost. In any case the technical fragmentation of the market places some limitation on what might be achieved.
Some interesting background on the Northern Line PFI from 1997 here*, making the point that making the manufacturer responsible for maintenance gave them an incentive to build the trains for future reliability. It also confirms that 36 trains per hour was the long term aim for the Northern Line.
But the PFI then ran into trouble when the Tubelines PPP happened because the PPP required a higher level of reliability than the PFI did, but Alstom had no incentive to deliver it – showing the problems with the lack of flexibility built into these long term contracts.** This dispute was resolved by, err, Tubelines going bankrupt. Then TfL took over, renewed the Alstom contract, and everyone was happy ever after.
* (and a look ahead at LT’s planned investment, including the Croxley Link estimated at £25 million!)
** One particular lawyer commented that the PFI was better drawn up than the PPP. Unfortunately he was the only person who could have stopped it, and he didn’t.
@Graham H
The increase in “liquidity” in the ROSCO market is interesting. It seems to me that it might lead to a surge in open access applications using discounted off-lease stock. Maybe Vivarail will be adding diesel engines to 455s and 465s?
Ian J …… As far as I recall, Tube Lines didn’t go bust; it was Metronet that failed. LU and Tube Lines couldn’t agree terms for the second period and LU bought them out with a contract with Andy [presumably Alstom PoP] for maintenance management ( which, by the way, is just ending/has just ended)
@anonymous of 0036 – theoretically,that must be right, which raises the further interesting question as to why it isn’t happening more these days, with the decline in the market power of the “traditional” ROSCOs and the weakening of the market effects of the Rothschilds’ formula. To set the debate going, a couple of thoughts:
– the upfront cost of conversion is by no means cheap and you would want an assured market before undertaking any large scale programme. VivaRail have been fairly cautious in the scale of their ambitions. The same point might be made about the more “simple” midlife refresh/life extension programmes for non-converted stock, as with the cl321 Renatus option.
– the market sectors where diesel 455s might be usefully redeployed are probably not that large,even for non-open-access operations. The suburban market has very little capacity for new services and its unclear what the attraction would be for any open access operator or how they would distinguish themselves from any incumbent – 455s are not obviously a good platform for that. For longer distance, quasi IC routes that applies even more so – although I suspect that some of the ex-Alphaline services (I have in mind the notoriously overloaded services such as Cardiff-Nottingham) ought to be contestable, and although there are probably paths to be had with a bit of ingenuity, the 455s and 456s don’t strike me as a good platform for devising a cheap but quality product with a USP that would see off the 17xs,Voyagers, and so on. May be I lack the vision….
Re Graham H,
Porterbrook reckon there is more than enough potential interest in the diesel /bi-mode conversions of 319s (769s to start appearing on Northern and ATWales soon) that they would potentially need to start looking at other mk3 EMU stock in their portfolio as they could run out of 319s to convert…
The North Downs line is more the vision than Cardiff – Notts.
Re Anon @0036,
Open access – There is an application on ORR’s desk at the moment to run some of the 6 available 442s out of Waterloo to abstract revenue from SWR.
ORR’s approval of some of the future First open access from Kings Cross to Newcastle /Edinburgh is one of the (many) reasons DfT effectively had to “renegotiate” with VTEC.
mark 3 emus (Class 317-322, 455, 456) and Networkers (class 465/466) are probably better than most emus to convert to dmus as diesel versions already exist (classes 150 and 165). Indeed, two cars currently running in class 455 electric units were converted from a (Mark 3) Class 210 demu.
@ngh – don’t get me wrong – I wasn’t rubbishing the idea of conversions per se, nor, to pick up your second post, the scope for open access per se,merely that putting the two together seemed less likely to be productive. I am sure that there is a market for 319 conversions; it just isn’t likely to be an open access one. An we all know that there are contestable niches for open access around, of which EC is a prime example,but I don’t see a converted 455 cutting that particular brand of Tewkesbury mustard. You – and others – have noticed how,however, a refreshed HST set can be a serious competitor there.
The 442s are also an interesting case – I have before recounted the “Silver Bullet” open access case worked up by some senior NSE managers , using the, err , 442s – and that is very much an example of what I had in mind when I discounted the 455s – with the 442s, you have a very good platform for developing added value products which can be easily distinguished from the competition, and there are profitable niche markets which can be exploited.
Outside the specific IC markets,such as EC and a handful of longer distance quasi intercity routes, much of the rail market is heavily subsidised (or heavily congested) and not at all attractive to open access.
Is the N Downs service attractive for an open access operator ? On the basis of the NSE studies, which are admittedly somewhat long in the tooth now, the answer would be a qualified “yes”. The route served – and this is unlikely to have changed much – three markets – a highly local movement between intermediate stations , low in volume and a heavy loss maker; commuting into Reading and Guildford, a noticeably peaky operation; and through traffic to Gatwick, most of which originated from beyond Reading. It is the last of these which is of most interest here. In 1992, we looked at Oxford-Gatwick*,but then it depended on the flyunder at Reading being available. Now, it would depend on that 3rd hourly path. So, definitely worth another look. Using 455s or 456s, probably not
*FWW in 1992,with the opening of the Channel Tunnel imminent, the prospect of a further extension to Ashford seemed worth exploring then, but dis aliter visum [anglice: the gods had other plans: (Malcolm)] and no one would bother with that now.
When it comes to conversion from electrical stock, I think Vivarail would argue that D stock was an exceptional case. The trains have an aluminium body shell that has lasted for forty years and is still in very good condition – so could be reasonably be expected to last another forty years. Also, some of the traction equipment was less than ten years old at the time of withdrawal.
The Class 319 may well similarly be a potential future candidate but it probably isn’t the case in general that retrofitting new engines to old electrical stock is a good idea.
By the way, I don’t think Stagecoach’s idea to put ex D stock on the Isle of Wight is as daft as people think. The tunnels were originally of main line size. As Anonymice points out the base was raised because of drainage problems but modern pumps are much more effective and reliable so the track could be partially lowered to accommodate D stock which is not as tall as main line stock. I have a feeling the platform height on the Isle of Wight is still that for main line trains.
More to the point with the Isle of Wight, D stock would probably be the best stock available for avoiding corrosion problems and there is no obvious successor for the 1938 stock currently there. Piccadilly line stock is the wrong technology (neither advanced and reliable or crude with little to go wrong), Bakerloo will already be at least 55 years old when it is withdrawn and the reliability of the current Central line stock in the long term is questionable.
This is all very interesting. Once the Porterbrook diesel/bi-mode conversion of the class 319 is proven, then there may well be demand for more. Clearly the southern 3rd rail trains would require a lot more work to make them suitable as AC bi-modes, but as diesel/DC bi-mode or a straight diesel-electric, they might make sense – particularly using the ex SWR class 455 which had a modern three phase propulsion package. One could (crayonista warning) add a transformer/rectifier and pantograph to the intermediate trailer – but that’s a great deal of work not just to the bodywork; brakes would also need attention.
But, and it’s a big but.
1) pretty much everywhere apart from London and the SE would take ex London and SE train is comparatively small numbers
2) apart from the ’80s mk3 designs there is a very large number of modern trains becoming available; in no particular order:
class 379 Electrostar – 30x 4 car set
Class 360 Desiro 21x 4 car sets, 5x 5 car sets
Class 350/2 Desiro 37x 4-car sets
Class 707 Desiro City 30x 5 car sets
That’s some 527 cars.
The fact is that there aren’t enough UK homes for all these trains
Ian J 15 January 2018 at 22:39
“Some interesting background on the Northern Line PFI from 1997 here*, making the point that making the manufacturer responsible for maintenance gave them an incentive to build the trains for future reliability. 2
That, and not clever-clever accounting tricks, is the good reason for long contracts in which the manufacturer or builder is also responsible for maintenance.
I once picked up a couple of Virgin Trains pamphlets. making just he same point about their new fleets of trains for West Coast and Cross Country (it was a few years ago).
Talking of maintenance & other similar contractual arrangements & also future use…
Is there any consensus on how the fallout from the “Carillion” implosion will affect rail services, especially in the London area, of course?
Or should that be a separate article [ Already being furiously scribbled/typed by someone in LR towers? ]
[Let’s not hijack the current thread with Carillon issues – unless directly relevant. PoP]
@AlanGriffiths – it certainly can – and should – work that way, but I’ve always felt more than a little uncomfortable about the risk that the asset manufacturer will so design it that you are then locked into whatever maintenance programme he devises, and for long after the original PFI/PPP contract has expired. This has become more of a problem as assets have become more complex assemblies of components – software and electronics are especially obvious targets for the “ransom strip” approach. PoP’s comments on substitute IoW stock apply here.
@130
A possible simpler conversion would be to operate these surplus units with suitable diesel locomotives, as push-pull sets. This may be a cheaper solution than fitting diesel engines under the floor. It would also allow a straightforward conversion back to straight-electric should the electrification programme re-start (or if the train spends part of its journey under the wires) – by uncoupling the loco and raising the pantograph.
Timbeau…..yes, clearly adding a loco could work, but its not simple and thus probably not cheap. Couplings, supply of power to the trains (lighting, public address, door control etc.) and push-pull controls all need to be sorted as neither locos nor trains were designed with this in mind. There are very few locos suitable for this purpose. Remember how well the class 57 worked with Pendolinos? New diesel locos are not cheap
Re PoP
Given that 2 customers (Northern and ATWales) have already signed up to lease some and the first unit should emerge from Brush at Loughborough in few weeks I would say it is beyond potential and further ahead (in units leased/sold) than Viva Rail..
Re Timbeau,
The units can easily be unconverted and everyone involved reckoned it was cheaper than the cost of reliable locos (See Anglia Scotrail and Northern issues at the moment). The 769s are getting some standard MAN engines mounted with all the associated equipment on easily removeable frames (similar to the IEP concept where you swap the frames/engines out with a forklift for servicing) fitted on each driving car.
Re Graham H
“Ransom Strip” or the alternative firm no longer exists as the last engineer involved is about to retire see Porterbrook with the Hunslet (Ex MetCam employees) Cl.323s that Porterbrook recently had new traction electronics retroffited by Alstom (and then found no one wanted to lease them after few years time).
Re 130 and Graham H,
The 769 acceleration on diesel (max 90mph) will apparently leave any current diesel unit apart from the highly powered Transpennine 185s trailing behind so they are an ideal solution for busier DMU routes and substantially cheaper than new. The North Downs route or Marshlink (Ashford – Hastings) with plenty of 3rd rail in places would be ideal from a converted ex SWR 455 as the performance both on and off 3rd rail would be better than the current DMUs.
ngh,
So an emerging theme is the need for modularity and the ability to switch in and out equipment. Whilst this is nothing new (I saw a video on this about HST in the early 1980s) I suspect leasing and the need to repurpose a vehicle if necessary is one factor that makes it even more important nowadays.
I know a big selling/leasing/marketing point of VivaRail is the minimal amount of maintenance required and the ease of doing it. I suspect that class 769 will have the same ethos. It will certainly make a difference to Ashford-Hastings if they don’t have to visit Selhurst too often.
@100ANDTHIRTY
Please forgive my ignorance, but why can’t the re-usable electric trains just have a diesel generator (and/or battery pack) fitted as a trailer?
You could then operate the train as if were third-rail or overhead powered (with a suitable long wire!), without all the need for something as powerful as an “engine” at the front?
@poP
“Whilst this is nothing new (I saw a video on this about HST in the early 1980s)”
Earlier than that – the Deltics were designed for rapid engine changes back in the early sixties
timbeau,
but not recorded on video (tape).
It was still a big deal with HST even if Deltics preceeded them. I remember it more because it was a very early encounter with video tape. Also I had to watch it as part of an introduction to modular programming even though the video itself was nothing to do with programming – but everything to do with modularisation.
Isle of Wight tunnel always restricted line to smallest of rolling stock before electrification, so unlikely D trains will fit without major work. Piccadilly trains failure rate still very good apart from wheelslide problems. Corrosion protection on pier may be a challenge.
Yes, the 1973ts isn’t exactly dead yet. Not too many years back it was ahead of all other LUL fleets at 400K mdbf, and is still fairly near the top now. This was likely down to depot staff developing fleet specific maintenance into an art though; how that would translate to a shed on the IOW is anyone’s guess, though as with the standards and 38ts, no doubt LUL would be involved in any ongoing work.
@ Graham H (15 January 2018 at 15:14) – the original rolling stock sell-off was a give-away, no question, and should have never happened. And as I meant to say, the Rosco’s were very too risk averse – it took new entrants to make the market work better.
@ Ian J (15 January 2018 at 22:39) – but the underlying problem with the Northern Line rolling stock is exactly as put big and fat in the article – it cannot go anywhere else, and TfL cannot get other rolling stock.
Briantist.. Unless I have misunderstood, What you suggest is exactly what Porterbrook is doing for the Class 319 to Class 769 conversion.
NGH Porterbrook’s own original press release suggested they would be able to “keep up with” Sprinters. From published figures, diesel performance will not be as good as on electric power, but the power to weight ratio will be better than a standard IEP. Of course this might have changed for the better during development.
However, my main point was that the market is too small to absorb more than a minority of the electric trains coming off lease. I mentioned 527 cars above which are post 2000 trains and there’s 180 class 458 cars which are from around the turn of the century. Then there’s the 160 Class 365 cars and nearly 130 class 323 cars from the ’90’s plus the SWR class 455, and GA 317 & 321 fleets from the ’80s. I have ignored the class 315. They are really ready for the great train set in the sky although I know their owners had ambitions for at least some of them somewhat further west.
Correction: power to weight ratio of a class 319 should be better than a standard (560kW engines) IEP when on diesel.
Re Briantist,
And that is exactly what Stadler will be supplying to Abellio Greater Anglia for the “rural” routes. 3 or 4 Coach EMU with an extra short generator car with a walk through corridor along one side and 2/3 engines / alternator rafts on the other side (2 engines for 3 coach, 3 engines for 4 coach. I.e. 3 coach unit is actually 3.5 length wise and 4 is 4.5.
What Porterbrook and Brush are doing with the 769 is just putting the engine rafts underneath 2 of the 4 cars where there is vacant space or easily moved items instead, the rafts will supply 750VDC to the existing 750VDC bus that is currently fed by the 3rd rail. The solution (same engine (MAN 12.8l flat 6)/ ABB alternator combo) has already been used on new (low floor) DMUs/Bimodes made by Alstom for SNCF over the last few years except they mount the engine raft on the roof instead.
Re PoP,
Maintenance – the other advantage of electric transmission compared to the current hydraulic or mechanical transmissions is that they will need far less maintenance due to the engine running at more constant speeds, less violent changes in load and lower vibration.
@Christian Schmidt – the ROSCO sale was no more nor less a very successful attempt to offload the servicing of a chunk of government onto the private sector with the highest possible price and the lowest possible risk. The market was rigged through the Rothschild indifference pricing formula, which supported the low risk. The victim was the taxpayer via the increased subsidy costs that resulted. Needless to say, the two calculations (sale receipts and subsequent costs) were never put together.
@Briantist
That is EXACTLY what the likes of Porterbrook ARE doing with the 319 conversions.
Firstly some folk need reminding why the conversion of 3rd rail units to Bi-modes is so attractive. Basically it is very easy to build a diesel engine / alternator combo that can produce 750V to fool the EXISTING traction gear that it is in fact working off DC con rail. Moreover because DC EMUs are designed with a full 750DC power line throughout (to link in with the collector shoes at each end), your new Engine / Alternator combo does not have to be on the same vehicle as the traction motors etc.
By contrast I have yet to see a small underfloor diesel engine setup capable of delivering 25KV to ‘fool’ the transformer it is working off AC – and moreover AC units tend to have the traction gear on the pantograph car (along with the 25KV transformer, precisely to avoid the need for HV inter vehicle connections) so there isn’t exactly much room there for engines etc.
Finally the original selling feature of these conversions was that they were ‘cheep’ and ‘quick’ to do precisely because they did not require major works. Obviously it is not beyond engineers to make a BR era AC EMU into a bi-mode, but not without it being a costly exercise. With the price of leasing brand new trains (even DMUs) being low at present, make the conversions too costly / protracted time wise and your operator might as well just go to Staddler or whoever and order some brand new bi-modes instead.
All this is why realistic candidates for Bi-modes have thus far been limited to the D-stock, the 319s and maybe the 455s. The DC Networkers are a question mark though as much depends on whether their bodyshell construction is suitable of taking the extra weight etc without serious strengthening (the 319s and 455s being based on the Steel Mk3 bodyshell, while the Networkers were Aluminum – and note that they do differ significantly from the diesel variant operated by GWR / Chiltern despite looking similar from the outside).
Re 130,
Agree most of that stock is going to be recycled as it isn’t fit for the future (mainly reliability or dwell times)
Porterbrook have admitted they were fairly conservative originally. We’ll see how they perform shortly.
@Briantist
“Please forgive my ignorance, but why can’t the re-usable electric trains just have a diesel generator (and/or battery pack) fitted as a trailer?”
If you are suggesting coupling a separate generator car to the train, rather than building the diesel generator into the existing train, there are problems with that – all the problems associated with the push-pull proposal discussed above, plus the need for a power feed between the generator trailer and the unit’s motors.
Phil That the DC EMUs have a 750V power line is only partly useful. They have to have an earth return installed. If there were no power lines, then it’s not all that much of a problem to install two large cables instead of one. For 25kV units that use three phase ac drives, the 25kV is transformed and rectified to DC (so-called DC link) before being inverted (variable voltage, variable frequency) for the AC traction motors. As an example, class 350/2 have two driving motor cars and their propulsion equipment is fed from the output of the transformer which is on an intermediate trailer car. Diesel generator(s) could feed the DC link. This applies to pretty much all post privatisation nominal DC and AC EMUs, provided space can be found
NGH – the Stadler data sheet for the Greater Anglia bi-modes issued at Railtex last year quoted 4 diesel engines for the 4-car and two for the 3-car. The quoted figures gave the 4-car a healthy power:weight ratio. Has this changed?
A question concerning funding & safety.
Following Carillion’s implosion, we are told that those Carillion employees contracted to do jobs for Network Rail are being paid … but, apparently many of them have been told to stay at home, nonetheless.
Because they are Signal & Track maintenace engineers & they no longer have an Employer’s Safety Case, nor valid Professional Indemnity Insurance.
I do wonder how long this situation will continue, & if anything will be done to correct the situation, before there is a breakdown requiring theor, er … “unavailable” services?
Deos anyone have any further information on this quandary?
NGH
“The lowest risk tier of borrowing on the LO stock was just 3.3% and the higher at 4.7% which isn’t exactly expensive.”
It is when you consider that the U.K. government can borrow at 1.8%. Very expensive in fact.
@Timbeau: The Stadler Bi-Modes are in fact exactly that to some extent….
Except that the Power Car is in the middle and is walkthrough, you could do the same with a 319 if you wanted to.
Stadler have said that the diesel generator vehicle could be removed (with one bogie) from the train. It serves no purpose other than to house the diesel generators. It is not a full length car. It shows what can be done when bi-mode is designed as an integral part of a modular design.
For the existing trains, there all be inevitable c0mpromises when trying to add diesel generators to existing trains. The 319 flex (769) is probably the least compromised as it adds diesel capability to an existing train without adding to train length, which is useful on lines where train length is a constraint.
By the way, my tablet’s spell checker kept trying to change ‘bogie’ to ‘Boris’. Do you think it knows something we don’t?
@100ANDTHIRTY: ‘…my tablet’s spell checker kept trying to change ‘bogie’ to ‘Boris’’. Some years ago I had an interest in a small air charter operator. I was writing the Pilot’s Notes for a new aeroplane (a Citation X) and my spellchecker insisted on changing ‘co-pilot’ to ‘copulate’. Knowing some of the individuals concerned I was tempted to leave it as it was.
@130 – that used to be Stadler’s USP,with the power car on its own 4 wheel chassis and the passenger modules hitched like a Rowan train on either side (given the Swiss origins of both, perhaps there was a link?)
@Littlejohn – A colleague who worked for a well known consultancy failed to check the spellcheck and found afterwards that his firm was referred to throughout the report as price waterhole. As his client remarked “It’s alright, we know where you live”.
Graham H…..the 4 wheeled pod is a feature of the Stadler GTW which is close to being light rail whilst running on ordinary tracks. The GA units are more like FLIRTs which are fully articulated with Jakobs bogies.
As readers are aware, the major cause of demand growth for transport in London is London employment. The December 2017 data for London employment is out today on nomis:
https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=130
I calculated annual growth figures for the last 10 years as follows:
December 2008 2.7%
December 2009 -4.3%
December 2010 1.4%
December 2011 2.4%
December 2012 3.2%
December 2013 4.5%
December 2014 3.1%
December 2015 2.1%
December 2016 1.8%
December 2017 1.7%
Readers can no doubt see here one of the causes of the TfL budget problems.
But that still means an extra 100,000 jobs in London since last year.
Not that I wholly understand the correlation between employment and transport demand tbh!
@ Stuart Matheson.
More employment means more people commuting means more peak capacity required.
And TfL will have a budget problem if they were banking on revenue still growing as fast as it was five years ago. A cumulative increase of 9% in ridership since 2013 may seem a lot, but if you were banking on nearly 20%, you have a revenue shortfall of nearly 9% below budget.
Timbeau
Thanks, that makes sense!
But those 100K extra jobs might easily include 50K Uber and delivery drivers (including takeaway mopeds). Which probably have signifanctly lower public transport demand overall than the mix of jobs being created 5 years ago.
@NGH Indeed, but the arithmetic does not assume all the extra jobs result in extra commuters, only that the proportion of employed people using public transport to get to work remains the same.
The same data series helpfully breaks down the data into 20 sectors. The three largest employment gainers in the year to December 2017 and the number of jobs gained were:
Q : Human health and social work activities 38 826
F : Construction 29 561
N : Administrative and support service activities 24 987
The three biggest losers were:
P : Education -22 054
K : Financial and insurance activities -13 138
R : Arts, entertainment and recreation -9 740
Total employment change was 98 118. So, maybe some evidence to support NGH’s theory that there has been a drift away from commuter-type employment.
@ Answer=42 – I would certainly agree with NGH that the “gig economy” type jobs and also those in self employment do not support a regular pattern of commuting between home and office. Given the earning potential is probably lower too there will be less income to splash on expensive tube journeys too. TfL themselves, in Travel in London Report 10, have remarked on a general decline in trip rates across London. That’s the “average person” simply using TfL services much less than in the past. TfL do not yet have a solid, verifiable explanation for the decline but we could all speculate as to causes.
The most worrying number in those stats is the decline in financial and insurance activities. Expect that number to increase vastly if what is being reported in the press about contingency plans about relocating jobs to mainland Europe is correct. The arts and entertainment decline must reflect the downward pressure on discretionary spend – again a factor noticed by TfL and supported by the number of restaurant chains cutting branches. I wonder if the decline in education reflects in lower demand for university education because of the extreme costs and debts that degree students now find themselves in? Schools are also under severe budgetary pressure so that may also be a factor behind job losses.
I am also midly astonished to see construction related employment show an increase as many large projects are coming to an end and housing starts are low in London. The recent reporting on construction activity has been pretty negative. Still I am expecting TfL’s financial woes to worsen considerably over the next 18-24 months as the country continues on its path to self destruction. We ain’t seen nothing yet!
“.. path to self destruction “. Strong feelings abound as to whether or not this is true. It is not something which is going to be resolved in these comment pages. Would everyone who feels moved to make such a comment please note that (a) it would be better decorated in some way (e.g. “on what appears to me to be a path to self destruction“. Doing this gives more scope for others to disagree without feeling obliged to say so. But (b) if such phrases become commonplace, or if the implicit invitation to discuss unmentionable things is taken up, then comments are liable to be removed without notice. This is a transport site. Passing references to non-transport matters where they have a bearing on what we are discussing (as in WW’s mention) are OK, but would people please not focus on them.
@WW, taking into consideration Malcolm’s strictures.
I generally agree with your points. If I can find some data or estimates on London area consumer expenditure trends, I will post them. This has got to be a key issue.
Employment in financial and insurance services. My best guess is a steady future abrasion of employment levels, rather than a sudden decline. To put the 2017 decline into perspective, over the three years to December 2017, London employment in the sector grew by 25 000; and it has a history of being highly variable.
Education employment possibly reflects the effects of government policy on limiting non-EU student numbers. If so, the decline could be more or less a one-off event.
Construction employment is highly variable and also reflects the mix of different types of activity. Three year growth to December was 40 000.
Employment in transport itself fell by 2500 in the year to December but has grown by 10 800 in the three years to December. Does this tie in with observations on the growth and plateauing of the number of Uber drivers?
A portion of travel in the London area takes place at weekends. Not large when compared to M-F commuting but still a portion.
The uncertainty of services at weekends must surely have contributed to the fall in passenger numbers. Each Saturday (and even more so on Sundays), the bewildered traveller will finds different bits of the underground, overground and national rail system not available because of Planned Engineering Work.
OK, it’s got to be done, but the sheer amount of it, week after week, adds an uncertainty that discourages travelling for pleasure purposes.
Yes, one can go from site to site checking and planning and The People Who Like Trains will happily do this but the average punter who just wants to get from A to B is less than content with a locked station and an uncertain wait in the cold for a Bus Replacement Service.
I sincerely hope that the Liz Line will manage at least its first year without having portions cancelled because of planned engineering work at weekends.
@RayL
“The uncertainty of services at weekends must surely have contributed to the fall in passenger numbers.”
Why would they cause a recent fall in numbers? Haven’t weekend closures always happened?
‘Detailed household expenditure by countries and regions ‘ data produced by the Office of National Statistics (ONS) for the period ‘financial year ending 2015 to financial year ending 2017’, (Table A35) measured as ‘average weekly household expenditure in £’ shows:
Transport services £32.60 7.2%
7.3.1 Rail and tube fares £ 8.90 3.6%
7.3.2 Bus and coach fares £ 1.60 3.3%
7.3.3 Combined fares £ 4.60 -3.1%
7.3.4 Other travel and transport £17.50 13.4%
The percentage shown is the approximate annual change I calculated from the same series two years previously, i.e. ‘financial year ending 2013 to financial year ending 2015’.
My conclusion is that the Uber effect is real and is the main force in the TfL income problem.
https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/expenditure/datasets/detailedhouseholdexpenditurebycountriesandregionsuktablea35
@ Ray L – I really don’t think Crossrail’s first, second or third years will be engineering works free. On the existing sections Network Rail will have regular booked closure slots to allow for track inspections, planned maintenance etc. They happen regularly on the Overground and this hasn’t changed since TfL took on the specification and funding role for these services.
The core tunnel on Crossrail may escape significant engineering closures for a couple of years as it’s new BUT the assets will wear and that wear will increase considerably as services ramp over a 12-15 month period. No one knows what may happen once all the systems have to interract with each other and are placed under day to day stress. I am sure the line’s design and the maintenance regimes are planned to avoid closures as much as possible but the unexpected can always happen. After all just look at the “fun” Bombardier, TfL and MTR Crossrail are having with the class 345 trains. 😉
Due to the challenge of fitting Crossrail into the existing underground scene, Tottenham Court Road station is on a curve and between there and Farringdon there is a curve that has a small enough radius that relatively routine rail replacement will be required as well as rail grinding to keep rolling contact fatigue at bay. No one knows for sure how long they will last but TfL/Crossrail has commissioned extensive modelling to help them plan.
Ans=42
My conclusion is that the Uber effect is real and is the main force in the TfL income problem.
Really?
A few thousand, at the most, mostly late-night travellers, with more money than sense are seriously affecting the income of TfL, which is, even on the UndergrounD (only) is carrying between 3-5 million passengers PER DAY.
Somehow, I don’t believe you, because the numbers simply don’t add up.
Greg Tingey,
Maybe, just possibly in terms of fare box revenue if you simplistically look at the numbers.
One feature of Uber is that, at night especially, you may well have more than one passenger for all or part of the journey so you can’t necessarily equate one Uber journey with only one lost passenger for TfL.
Probably far more relevant is Uber’s contribution to additional traffic congestion which is very difficult quantify bearing in mind private hire was around before Uber and other companies with convenient apps. I think a lot of people would argue this has had a significant impact on bus revenue as they believe that Uber has taken bus use to the tipping point where people abandon buses due to longer journey times. If this is because it is quicker to walk or they decide not to make the journey in the first place then this can have a significant impact on TfL revenue.
PoP
Insert rant here on Uber completly screwing with normal traffic flows, as well as everything else, all in the name of a select few making millions (or not ) …..
Yeah, depressing, isn’t it?
@Greg
I could well be wrong. But how else do you explain the vastly greater increase in expenditure on the ‘Other travel and transport’ sub-component than on transport as a whole?
@ GT & Answer=42
Does this sub-component also include air fares? Might this be attributable to the effect of Ryan Air & Easy Jet price competition encouraging foreign travel? I assume economic stabalisation leading to an increase in business travel would be excluded from this household spend data.
It would also be interesting to see what effect Night Tube/Overground has on spending if we go with GT’s theory of the change being attributed to late night revellers.
@Timbeau: I thought the weekend closures on the Night Tube part of the network were largely a thing of the past these days?
@Snowy
I’ve looked at the classification system and you are probably right. Therefore my conclusion is unjustified.
The post-2013 (accelerating more last year as E-W and N-S superhighways opened) cycling revolution must have given TfL’s ridership a bit of a hit. The figures now on display at certain locations of over 5000 cyclists per day/100000 so far this year past those particular points are definitely large enough to have an effect.
@SH(LR)
“I thought the weekend closures on the Night Tube part of the network were largely a thing of the past these days?”
An awful lot of work was done on those lines prior to introduction of the Night Tube to avoid weekend closures, but the resulting maintenance holiday won’t last forever.
And anyway RayL’s original comment suggested there had been a recent increase in weekend closures
100andthirty,
And, I believe, not helped when Crossrail discovered that EDF energy had recently built a shaft in the vicinity and put cables down it despite its location being within the safeguarded area. As a result they had to make some minor modifications to the route before the plans went before parliament.
Southern Heights (Light Railway),
I suspect this is referring to closures due to Four Lines Modernisation (SSR resignalling) which is more than making up for the reduction on Deep Tube lines. Because of the Battersea extension and other improvements necessary to provide a better service, there are still the occasional weekend/holiday closures on the Northern Line. They are few but they create uncertainty.
@Timbeau: I don’t think I’m seeing that on the Night Tube Lines, on the Met/Dist etc.. Yes, but I suspect that’s partially signalling related? Perhaps also to get ready for night tube on these lines, by doing maintenance now?
Southern Heights (Light Railway)
Well, Met & District line weekend closures at practically all signalling related. Mostly for either installation or testing of the signalling. Even the track work is mostly because the preferred layout under the new signalling is different from what is there currently – and therefore signalling related.
The replacement of drainage between Finchley Road and Baker St shows that a lot of traditional trackwork can now be done without weekend closures.
@ Greg / PoP – there are a few factors in play with Uber and similar “gig economy” services driven by technology. There is certainly a night time factor. PoP is quite correct to point out that TfL doesn’t lose one passenger to Uber – they possibly lose up to 4 or 5 who may travelled together on night buses. I’ve read plenty of anecdotal tales of such modal swaps taking place. The Night Bus network has been losing passengers for the last 2-3 years (based on TfL stats). I expect the numbers for 2017/18, when published in late Spring, will be a horror story. TfL have had to make extensive frequency cuts to the night network and have publicly stated some poorly used routes may go altogether. For the remaining leisure travel market then app driven facilities to have food and drink delivered to people’s homes have reduced demand for “eating out” travel. Look at the numbers of restaurant / eaterie chains in financial trouble. Other things like on demand TV and film services may similarly reduce leisure related travel. People are reducing their discretionary spend and this affects discretionary leisure travel. Deputy Mayor Val Shawcross has suggested these things are affecting usage of TfL services.
If we look at Uber’s daytime impact then this is two fold – one on patronage and revenue and the other on operating cost. Increased congestion slows buses down thus making the service more expensive to operate. Slower buses discourage people from travelling. Therefore TfL receives less income to operate a less attractive, more expensive to run service. The worst of all scenarios. TfL has taken some action to try to improve running speeds but is also reducing frequencies across London. This makes the bus service less attractive by increasing wait times. Longer wait times and worse journey times just push people into the arms of the likes of Uber. It is also just worth noting that if you make the bus element of a public transport journey worse then you are likely, at the margin, to also lose rail and tube journeys too. People look at the overall experience not just one element. One tiny example – TfL cut the frequency of a local bus route I use. I’ve now given up using it as the marginal impact on wait times was enough to make me take another route. Now the public transport journey has just transferred in my case but others may have stopped travelling altogether or changed to a service like Uber or minicabs. These are all rational choices.
If people have become more time sensitive or more attuned to perceiving “instant” transport services via apps as more convenient then TfL has a real problem on its hands. There is not very much it can do in such a cash constrained environment that it now finds itself in to compete with such services. It hasn’t the money to improve bus services and I must say I’m a tad sceptical about many tube, tram and DLR improvements coming on stream. Clearly the SSR resignalling has to happen plus Bank rebuild and the Battersea extension but beyond that? Obviously we have some Crossrail and Overground capacity expansion on the way but it remains to be seen how well this is utilised compared to past pronouncements. I know I take a pessimistic view of things but the picture doesn’t look terribly positive to me. Each time TfL publish a set of numbers there’s little good news contained therein. The budget for 2018/19 is already worse than envisaged in the business plan published just 3 months ago.
@WW
I’m fully aware that the plural of anecdote isn’t data. But..
Every attempt I have made to use the TfL bus services in the last six month have been a utter disappointment.
The 97 route though East Village hasn’t been stopping here for a month now. But TfL doesn’t record this data electronically so you’d never know.
The Hackney Road/Columbia Road (R) stop I use in Hoxton has also been closed for months, due to scaffolding.
One day I turned up to Liverpool Street to get a bus to Hoxton and all the bus stops on Bishopsgate were closed. I walked up to Shoreditch station, and ended up taking a single stop trip due to the target stop being closed.
In the last two months I was going to see GTR at Monument. I got a bus from Liverpool Street (it was pouring with rain and I had a laptop) and it ended up taking 45 minutes.
Today, it took a bus I was on 29 minutes to get a 0.8 miles up Blackfriars Road! And I thought the previous trip of 23 minutes for 2.0 miles was slow.
Anyway, it is my contention that TfL refusing to collect valid bus data is putting off users who have ever used Google Maps or Uber. It really is no good having a low charge of £1.50 per hour for a bus if they go both slowly and then won’t stop at the destination you want.
The only way TfL can fix the bus issue is to start being 100% honest about how useless the service is these days and then trying what’s actually wrong.
Another thing that is needed is loading data about the buses: buses that are running at capacity end up having awful dwell times.
Re WW @1958,
Mostly agree but I’m not necessarily so pessimistic about the future – I’ll try to put fingers to keyboard over the long weekend on the revenue /passenger numbers subject my view is that there are some one off reasons as far as NR services are concerned.
Re Briantist
Completely agree by may be they don’t want to fix the problems which is why they haven’t? If someone is doing something that appears stupid they may not necessarily be stupid if they have motives…
Back to the original topic CR rolling stock and leasing costs.
TfL formally signed the contract for the extra 345 units yesterday.
5 units (1+4) extra to take the total to 70 units at a cost of £73m including the multi-decade support/maintenance agreement. so £73m/45 cars at £1.62m per car inc maintenance about 8% more than the original units ordered.
@ Briantist – I’m not sure what you mean by “proper bus data”. Clearly every bus is still tracked by I-Bus (barring any equipment failures). TfL know they have to replace I-Bus and many of the linked systems due to single contractor “lock in” (on I-Bus) and technical obsolescence on other systems. Bus radio is to be replaced.
If you mean things like which stops are closed or buses on diversion then I would agree with you that this is a shambles. It is worse now, IME, than it’s ever been and it was never good. It is reliant on multiple sources of original data about road works, incidents etc. It then has to be transcribed then forwarded and then entered into multiple systems. Often it is reliant on the local infrastructure managers who are responsible for very large areas covering thousands of stops. It’s practically impossible for them to keep on top of changes especially if there are large scale works covering multiple locations and stops. Waltham Forest with mini holland works is a classic example of this. One of my local stops has been closed for such works – the closure was not shown in I-Bus so would not be passed via the API feed to apps / websites. Your experience with the Olympic Park is another although I do think some disruption info has been posted about that on TfL’s site. There is also a need for people at TfL HQ to also enter this data into systems that can place the info on the TfL website, into I-Bus and also on Countdown screens. I’ve endless experience of this simply not being done – I assume because so many people have left and jobs have been rationalised to the point that these information flows cannot work properly. I don’t know why TfL have allowed this to happen.
As for information on bus loadings then forget about that. A facility was trialled on route 141 and the vehicles then transferred to the 319 and it was never heard of again. A plethora of IT based projects have been axed in TfL and I think this was one of them – presumably due to expense and dubious benefits when patronage levels are falling rather than increasing. You hardly have to worry about overcrowded buses if people are deserting the network.
I don’t see very much improving in the areas you express concern about because TfL still has to save enormous amounts of money which means more staff cuts, more projects being cancelled and less service being operated (especially buses). The sad thing with all of this is that if finances ever do improve then there may so few passengers that “good idea” projects may never be viable as there are insufficient passengers benefits.
Walthamstow Writer,
Yes, I have experienced that at its worst. We had a road closure for a Christmas market in Coulsdon. For one route, TfL helpfully put up notices telling passengers to catch the bus at an alternative stop. Only trouble was, that stop had been closed for days for roadworks and remained closed. As a result, the bus went on a needless long diversion down narrow streets to serve no stops at all when it could have just stuck to the main road – which would have helped it make up time for delays caused by traffic jams in the local area due to this road closure.
When information on diversions is forthcoming it can be very indigestible. For example a long list of turn instructions, clearly intended as instructions for drivers, but of little use for passengers, and giving no information about which stops are or are not served, or what alternative routes might be available.
This debate echoes Diamond Geezer’s (DG) rant today about poor information on DLR during their strike on 28th March 2018. It is all illustrating that the information needs of customers are very complex. Their needs don’t become more complex at times of disruption, but a lot more people want information at such times, as even regular travellers suddenly want information they don’t normally need.
The challenge is providing that information during disruption. Where works are planned, it should be easy, but as others have pointed out, accurate information has to be obtained and fed into the various systems. These systems have, in all probability, “just growed”.
It is quite another thing to respond to a failure or some other “emerging situation”. I may be an old fuddy duddy, but i suspect we’ve a long way to go before we get the right people and the right data systems to be able to respond, especially, back to DG’s rant, management are in the mode of “lets try and run something with whatever resources we can muster on the day”.
WW:
Lack of bus & other information …
See also Diamond Geezer’s Saga of Bus stop “M” & today’s post about lack of/wrong information on the DLR.
[This is going to be the very last time I let you refer to bus stop M PoP]
@WW
@ngh
Giving it some thought, I suppose that the issue about Uber vs TfL is perhaps that there is no backing for what basically is a department of government to fight back against the power and money of Silicon Valley.
It is a direct parallel to the BBC iPlayer vs Netflix et al (OTT video). The former might be a century-old bastion and repository of British culture, but is utter, utter minion in global terms.
https://ukfree.tv/styles/images/2017/MCap-2017.png
As you both suggest the issue for TfL is that, despite trying very, very hard to embrace Open Data, without serious management focus on collecting the right data and using it to make the customer experience better, all is probably lost to Uber and those that follow it.
For example, the TfL system have a long-standing problem with terminal stations. The various APIs still don’t show departures from starting stations both on the tube (Jubilee at Stratford) or bus (where a bus route does not use an off-stop stand). This has been a “known problem” for a year and no solution is forthcoming.
But, people will use public transport if it appears both competitively priced and easy-to-use.
When Uber says your ride will be 4 minutes, they mean it. You can time it. The accuracy makes the customer happy and want to reuse the service.
So, every single time a person finds a bus stop closed with no hint as to what to do, or be told a bus is doing to be 4 minutes when it’s 15, or can’t board a bus because it’s overloaded, it’s driving a potential customer into the hands of Uber.
Perhaps the reality is the political wind is currently set to “neo-liberal or die” and TfL’s buses and the BBC are public service zombies: TfL’s £5.6 billion (annual income) just can’t fight Uber’s $72 billion market cap.
The word “rant” can have negative connotations, although I am sure 100andthirty did not intend any. The DG article is factual, relating what actually happened when DG tried to use the information offered. Any conclusions which might be drawn about who is responsible for the information shortcomings revealed are in readers’ minds only.
It could be common ground that management’s hearts were in the right place, and that they were doing their best. However, the outcomes may well have fallen short of what would happen in an ideal world, for a range of complex reasons.
Malcolm; as you suggest, I intend no slight on managers doing their best with resources to hand, just that it’s hard for the information stream to keep up, let alone anticipate what’s about to happen.
Equally, DG’s remarks were in my style of rant – accurate, factual but still critical.
@Briantist
If so many people will happily the significant higher costs of Uber compared to the bus – especially if they have reached the daily cap or are on a travel card, making the marginal cost of the bus journey nil – then a lot of work on price elasticities and economic theory more generally, will need to be redone. If Uber is to be believed when they say that their peak demand is about midnight – and I can’t see why they would say this if it was not true – then it is not speed or traffic congestion which is driving Uber usage but lack of sufficient public transport services. This becomes even more obvious if Uber is to be believed (and, again, I can’t see any reason why it shouldn’t) that the night tube has had a very significant impact on their demand on friday and saturday nights, with hirings from central London down and last mile trips from suburban rail stations up.
@QUINLET
“If so many people will happily the significant higher costs of Uber compared to the bus – especially if they have reached the daily cap or are on a travel card, making the marginal cost of the bus journey nil – then a lot of work on price elasticities and economic theory more generally, will need to be redone.”
Yes, and it has been done. It generally falls under the banner of Behavioural Economics. One popular sub-category is Nudge Theory (positive reinforcement and indirect suggestions as ways to influence the behaviour and decision making of groups or individuals).
My mixing both mathematical economics with psychology, using Behavioural Economics it is possible to better comprehend, predict and influence economic behaviour.
Your points that the individual who is time-rich and cash-poor will use the bus service because they can afford it, there time-rich and fully subsidized bus users (over 60s and pre-teens) who can use it off peak for free, there are pre-paid users who have no marginal costs are all still valid.
But Behavioural Economics can look at other psychological traits: do people like me use the bus? Will I be seen waiting for a bus? Will I have to stand all the way on the bus? If I go by bus in a group, can we converse? Can I trust the departure time enough to go grab a coffee? What will the person I going to me think of me if I’m late and I took the bus? Will someone invade my personal space?
So, to my mind the “trick” that Uber is playing is against public transport for the urban professional is by inserting the answer “take an Uber” into all and any question about inter-city transport. Behavioural Economics says that Uber is a “smart” choice: it works (always important), it is simple to use, no payments at the end, no negotiation of prices. These individuals will take a “smart option” because they primarily see themselves as “smart people”.
From personal observation with a Behavioural Economics hat on, it seems to me that London Overground might be “smart choice” because it’s was established with marketing principles that are Uber like: it’s simple, clean, safe (staff on stations), reliable and accurate. The DLR might be similar because the driverless trains are “smart”.
Behavioural Economics suggest that the buses will probably end up being a service of last resort for the poor, unless they can start being “a thing smart people use”.
Briantist,
Most definitely.
In particular if a journey is free or already paid for as the person has a travelcard (which amounts to the same thing) and a person has a choice of bus or train why do they generally consistently choose one over the other?
In the pre-Beeching era some lines ran nearly empty because people were using the nearly-parallel bus service. But I don’t think anyone seriously investigated why people chose the bus in preference to the train. It might have been something that would have been hard to fix but could equally have been something simple like the bus was warmer or they didn’t like the miserable person in the booking office who moaned if they didn’t have the exact fare or they felt the guard didn’t give them enough time to get on and off and they didn’t like him blowing his whistle at them.
Briantist
I think you meant: “Intra-City transport” re Uber, not inter-city, which is something else entirely?
@GREG TINGEY
Yes, indeed! An inter-city Uber would be another proposition entirely. But, Amazon still only sells books, doesn’t it?
I’ve had another trawl through the data and I’ve found that UK-wide household expenditure on rail and tube fares increased by an average of 1.4% over the two years to end financial year 2017, compared with the London figure of 3.6% that I quoted above.
For ‘Taxis and hired cars with drivers,’ the UK growth figure was 13.6%. I cannot get an equivalent London figure.
I don’t see any way round the conclusion that this is Uber etc. Anyone has contrary information / hypothesis?
https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/expenditure/datasets/componentsofhouseholdexpenditureuktablea1
Re Briantist,
I’m sure a TfL marketing campaign highlighting Uber as an anti-social option could damage the Uber image and psychology they use.
E.g. How real Mini-Cab NOx and PM emissions are higher than Rail / Tube / Cycling
E.g. How increasing Mini-Cab use has slowed down traffic speeds thus increasing all ICE vehicle emissions
TfL would also need to step up their data offering (and apps.) as well as the image of tube* /overground** / bus / crossrail*** including basics like cleanliness and may be even bite the bullet and cooperated with National Rail TOCs and integrate data and cross marketing.
There is plenty in progress that should help TfL in the next year or 2:
* e.g. SSR resignalling with more capacity and more night tube, retraction Central line (reliability), Bank improvements,
**e.g. new 710s electric, GOBLin
*** Crossrail opening
The question is what to do about buses as there is nothing obvious in the pipe line there, possibly analysis and a preemptive order of Red lime paint to start with?
Re Answer=42,
Agree that Uber is the driver behind this.
NGH
TfL would also need to step up their data offering…
Yes, well, Diamond Geezer had some sharp words on that very subject, yesterday
@Briantist
I can understand your arguments where the choice is actually (or essentially) cost free, such as between bus and train when using a travel card. However the choice between using Uber or bus (or even underground) is not cost neutral – except, perhaps where a business is paying and the business doesn’t much care what mode is used or how much it costs, although such businesses are getting fewer. Where there is a substantial cost penalty in using the ‘smart’ option there will, in conventional economics, be a price elasticity of demand and the ‘benefit’ of being sent to be ‘smart’ would have to be very considerable to overcome this. Some people may be swayed by this, but I don’t think there’s any evidence that this number is large. Hence, as I say, the fact that, unlike in the USA, the peak hours for Uber demand in London are late at night and not during daytime or peak hours.
PoP advances a number of possible ‘nudges’ for why people might have used the bus instead of the train in pre-Beeching times. More rationally the reasons might also have included that the railway station was inconveniently sited and distant from the main settlements (quite frequent in rural areas), that the trains ran at inconvenient times, that connection times at junctions were poor, that the bus was cheaper. IMHO all of these would have had a greater impact on modal choice than dislike of individual members of staff or dislike of whistles.
@ Briantist – I understand the behavioural issues you cite but I’m not entirely convinced. They may apply to a tiny part of the market where price is seemingly not any great issue or where, as you suggest, being seen to be “hip and tech savvy” plays to their own ego or that of their peers. I think I am just too old to ever be swayed by such nonsense.
I am not convinced that Uber is the main cause of the reversal of fortunes of the bus network. After all bus ridership in London has increased, sometimes substantially, from 1993 to 2014 when there was a mix of well understood factors in place – a growing economy, rising population, rising incomes, more bus service volume and improved frequencies and reliability. That’s in broad terms before anyone goes into micro details to try to correct me.
The question is what has happened since 2014 – lots of road works, an abandonment of the old “traffic hierarchy” meaning buses lost priority, cycle lane works reduced highway network capacity, Countdown info was made available very widely, fares kept rising. Subsequent to that further changes to bus fares with the Hopper seem to have changed people’s approach. TfL themselves have said the provision of real time info has changed people’s way of using buses – people don’t turn up at random to the same extent meaning that the old link of “more frequency (lower wait times) = more ridership” seems to be broken. I certainly don’t turn up at random for some of my bus journeys – I plan to get to the stop with very little wait time. In short I am using info to reduce my excess wait time rather than relying on TfL to do so with a better service.
The Hopper fare is potentially undermining the provision of new through services on the bus network. Worse it may result in TfL removing such services across the network forcing people into changing routes. Even in a network as dense and generally frequent as London’s people do not like enforced changes. Such an approach also runs counter to Uber’s “door to door” service. The Hopper ticket also reduces the potential benefits on new services as a proportion of users of new services will not be generating any revenue as they will have “hopped” at zero or low marginal cost. With these various sources of uncertainty as to how and when people will use buses there must be a real issue for TfL’s planners and economists in ensuring their models of revenue and passenger benefits are accurate or can be updated in a reliable way. In short some of the old “certainties” appear (to me) to have changed or be vulnerable. This doesn’t bode terribly well for the bus network being able to “fight back”.
quinlet,
Your reasons for not choosing the train are, of course, more significant. But the point of nudge theory is to look at the multitude of small, changeable, easily-overlooked factors. The two are not mutually exclusive. If the station isn’t in the centre of town, is it easy to get to, are their footpaths, are they pleasant to use? etc, etc. If one has to wait to change at a junction are the waiting facilities pleasant, is there a tea room (then, nowadays coffee bar)?
I have the choice of train or bus. Usually I get the bus and change at Purley because of the additional walk to the local station made worse by the fear of just missing the train and having to walk back to the bus stop. Yet there is a closed railway-owned footpath leading to the London-bound platform that would save at least two minutes and having to use the foot overbridge. If this were open, I would my local station more often. If they built a direct route from the main road (over currently unused private land) I would probably always choose the train unless a bus happened to come along at just the right moment.
There are two other important factors in why people would choose to use Uber or other services, especially at night. If there are 4 of you then you can go a reasonable distance for another £5 each, or essentially the cost of a pint. The journey will generally be faster, at least door-to-door, and perhaps even more importantly, there is no risk of random nutjobs making the journey uncomfortable or even dangerous. Even just groups of drunks who aren’t doing any actual harm can be seriously annoying and put you off choosing the night bus option.
So whilst it may make no economic sense to choose to pay when you could have the journey for free, the benefits more than outweigh the cost which is probably pretty marginal compared to the cost of a night out these days.
The only way TfL can solve that one is probably to have much more security on buses and tubes which then makes the services even more unviable.
Purely anecdotally, if I look at my friends (mostly in their 30s), many of whom use Uber a lot, I see clear patterns. Firstly, prior to the arrival of Uber et al none used taxis all that much. Uber’s convenience and relative cheapness have changed the game. Secondly, none use Uber for commuting, or much in the daytime at all. It’s largely a mode of choice for going out in the evenings, when there is less traffic congestion and fewer public transport options. Thirdly, many use Uber most when they are travelling in groups, for obvious cost reasons. Fourthly, my South London friends use Uber far more than those in North London. This appears to be due to the paucity of fast and convenient night time public transport South of the river.
To give a very realistic example, Shoreditch to my friend’s flat in Hither Green after midnight takes 3 buses, a sizeable walk and (if the connections work out well) 1 hr 15 mins (cycling would be quicker!). Uber takes 25 mins & £25. Given this choice, she will take Uber home every time, and possibly on the way out earlier in the evening as well if she is with others or in a hurry and doesn’t fancy working out what South Eastern are up to this week.
Cross South London journeys are sometimes even more skewed towards Uber:
– Brixton – Greenwich: 2 buses & 42 mins or 1 Uber, 18 mins & £15
Shortish ones are little better due to the lack of direct bus routes:
– Blackheath – Hither Green: 2 buses & 25 mins (if Lewisham isn’t gridlocked) or 1 Uber, 9 mins & £7
As London’s night life has increasingly been pushed out of Zone 1, orbital journeys like these are becoming the norm for late night travel and the current bus network doesn’t reflect that.
If we consider just the time aspect and ignore convenience or comfort differences between night buses and taxis, the opportunity cost of taking the buses rather than Uber for the 3 journeys above is, respectively:
– £28, £33 and £21 per hour if travelling alone
– £13, £15 and £8 per hour if 2 passengers
– £8, £9 and £3 per hour if 3 passengers
– £6, £6 and £1 per hour if 4 passengers
These are not big numbers for many people in London. TfL’s focus on minimising the cost of buses will therefore have no impact on the choices of moderately well-off people making non-routine journeys. If they want to win people back onto buses from Uber et al, they need to increase bus speeds and bus frequencies, and add more orbital, but fast & direct, routes. Unfortunately, it seems like the response under tight budgets is the opposite.
PoP
Smitham, as was, now a renamed Coulsdon N, yes? A glance at the Aerial view shows the problem …..
Stewart
Your examples show how well-off we are for transport on our side of the river.
Even not at weekends, when “Night Tube” is running, my last train home is 01.03 & it’s a 4tph service.
Compare & contrast with the miserable offerings from either SE or Southern & one can see why Uber is taking custom
Greg Tingey,
No. Reedham. See here on Google satellite view.
A path from the nearest point on the Brighton Road to platform 1 utilising currently unused land or the car park would be less than 100 metres.
The current route from the nearest point on the Brighton Road (the road junction) via Watney Close and over the platform overbridge is over 400 metres.
Not visible on the satellite image but visible here is a perfectly good but overgrown path to platform 1 – but I understand not easy to make comply with disabled access requirements (but then neither is the foot overbridge!) This would reduce the walking distance by about 140m for anyone approaching from the Brighton Road and wanting a London train.
They even used this path to bring plant to platform 1 a few years ago when replacing the footbridge.
It is even worse for some people in the 1960s estate on the other side of the Brighton line (eg. Aveling Close). They have a massive walk to the station yet a footbridge over the Brighton line would reduce this considerably (by about 500m).
This can’t be the only instance. Repeat this a number of times for the occurrences in London and wonder in how many cases that means people decide not to make the journey at all or take the bus or use their phone to book an Uber taxi.
@Greg
Smitham was renamed Coulson Town (not North) in 2011. It on the SER’s Tattenham Corner branch, which runs alongside the Brighton Main Line from there, through Reedham, to Purley.
Coulsdon North was the name of a station on the LBSCR’s fast “Quarry” line (with no platforms on the slow lines) which closed in 1983. It was right next door to Smitham, but most of its site is now occupied by the Coulsdon Relief Road.
PoP
Almost as bad as Angel Road – which is now beiong fixed ( By demolition & replacement …. )
Timbeau
I know – I went to the old Coulsdon N.
Google maps & Bing have got the renaming wrong though
@ Stewart – I am clearly not in the right demographic for orbital night time travel in order to “have a night out” but those financial numbers are at levels I’d have baulked at when much younger and receipt of a decent salary. OK they’re low for shortish, multi person trips but otherwise they’re crazy high to me. I can understand why some people would fork out money to avoid the risk of multiple changes of bus and long waits if they were travelling on their own and felt vulnerable.
I agree with your final point that there is nothing that TfL will or can do to counteract the loss of passengers at night time. In some respects this is the sort of “market” where smart, demand responsive minibuses running on identified “night time” corridors could potentially be a money spinner for TfL. However it doesn’t have the money to establish the required infrastructure for such a service nor does this potential market align with the Mayor’s Transport Strategy which has a different view of the role of demand responsive transport services. In short it ain’t gonna happen under TfL’s direct control.
@WW – It really is horses for courses. I have a Freedom Pass and there is a good bus service late at night from Aldwych/Strand across Waterloo Bridge into the depths of South London, which I often use. However, often leaving a restaurant after a show with a companion who has an Oyster card and who needs to get up at 6am, one or two taxis seen approaching along the Strand from Charing Cross with their yellow For Hire signs lit after midnight do become rather an attraction. Indeed, the banter between black cab driver and me tends to shorten the journey seemingly to just a few minutes. We pass by buses on the same route and I feel rather guilty but the cab gets us right to the front door safe and sound. The fare may approach £25 these days but that’s almost nothing compared with that already spent for two of us in the theatre and restaurant! It’s a good night out.
Compare that with a lively and pleasant night out with our LR pals in the pub every month. Then, the bus for me gets me home nearly as swiftly and I wouldn’t dream of getting a cab, no matter how many may be seen in Borough High Street.
Complaint: Why aren’t black cabs permitted to turn right eastbound from the main stretch of the Strand towards Waterloo Bridge as buses are? Circumnavigating Aldwych and back again can easily add £2-3 to the fare in congested conditions.
PoP
I actually asked about that path to Redham a few years ago on a passengers forum. My request was dismissed. It would have been great in the pushchair days. The 1980s at Aveling close at al is still closer to Reedham than Purley but only if there happens to be a train waiting at Purley. If you want to go to London bridge and happen to leave the house at the right time then Reedham is better. The 5 minute waits for connecting to a caterham train will make it less useful in May.
@Graham F
It costs everyone else to go round the Aldwych too, you know. Why should taxis have the privilege of going where other cars can’t?
The real reason is probably because the right turn bay at the junction is only big enough for one bus. If taxis were permitted to use it, there would be a queue of them backing up and blocking the Strand for straight ahead traffic.
Any taxi driver worth his salt heading for the South Bank from the Strand should know there are alternative routes via Westminster or Blackfriars Bridges (depending which part of SE1 you are headed for) if circumnavigating the Aldwych is taking as long as that – unless they want to illegally drop a passenger for Waterloo Station on Mepham Street instead of using the taxi road.
@timbeau – always ask for the Union Jack Club rather than Waterloo Station. (You might get some odd looks but it saves a few quid).
And back on topic:
TfL have finally agreed the sale and leaseback deal for the 345s:
https://tfl.gov.uk/info-for/media/press-releases/2019/march/tfl-completes-sale-and-leaseback-of-elizabeth-line-trains-to-345-rail-leasing-consortium
The notes to editor also has one interesting snippet on progress:
.
i.e. the trains are on time (even if the software isn’t!
Not much surprise that SMBC is involved given their involvement in a large number of the new rail deals and the long terms they prefer leasing on. So TfL rail should also be paying a sensible interest rate too.
The asset value is also much near current price than the price paid to reflect the devaluation of the pound since the original purchase funded directly by HMT.
“So far, 57 of the full fleet of 70 trains for the Elizabeth line have been built.”
“the trains are on time”
I find this combination of facts surprising given that (a subset of) services were originally due to start in December.
Is the word “built” correct here, or should it be “delivered”?
Although it wasn’t expected for the various parts of the line to be joined up yet, I had expected that the components would still require a not-dissimilar number of units to run.
Clearly I was wrong on this!
@DJL
Fewer trains would have been needed initially, as until the Shenfield line is plugged in, only half the service through the core (to/from Abbey Wood) would be running. This would, I think, more than make up for the extra layover times for the separate services terminating at Paddington and Liverpool Street.
Re DJL,
Delivered.
CR would only have taken over Paddington -Reading / Maidenhead from GWR and added 2tph to T5 this coming December.
CR wouldn’t have started Shenfield- Paddington (rather than LST HL) until after May this year.
The 315 were to remain in service to provide the peak LST high level only 4tph while the platforms and 7 car units got lengthened.
So already more than enough delivered already to have run Phase 4 from this May TT change day and have spare units for driver training, testing etc. 9 weeks before the change.
The build rate averages a unit every 11-12 days (excluding Xmas NY break etc).
Construction of the extra 2 cars for the 7 cars is well under way too.
I think the bit I had missed was that of there being only half the core service.
I knew the Shenfield trains were stopping at LST until a later phase, but for some reason I missed the obvious conclusion about the core…
Which is obvious really, so now I feel like a fool.
It is also worth noting that at the last Assembly Transport Committee
meetinggrilling 10 days ago the trains weren’t late any more unlike “the 18 month late” in pre-Christmas grilling sessions. The software and the ability to test it is another matter, but they are treating that separately now.