Discussion Paper - Future of Rail: Demand

Future of Rail: Demand Summary of discussions January 2025 Background Understanding the future potential demand for rail is crucial to the development of any long-term transport strategy, allowing the UK to plan for the capability required.

Rail demand has already recovered to 97% of pre-Covid levels, and is continuing to grow.

A year ago, RIA commissioned Steer to assess scenarios of future passenger demand.

Their analysis identified scenarios for growth above pre-pandemic levels of between 37% and 97% by 2050, depending on government policies. This suggests a huge opportunity to grow revenues, and transform the use of rail as part of an integrated transport network.

The Future of Rail: Demand event explored the latest picture for future passenger and freight growth. Discussions then looked at how demand can be planned for, as part of devolved and national strategies, and how passenger demand – and revenue growth – can be secured. Careful analysis of the opportunities for future rail demand, considering particular demographics and user groups, will be central to long-term success of any transport strategy.

Key discussion points • • • •

What is the latest evidence on passenger rail demand post pandemic?

What is required to meet rail freight growth targets?

Transport planning in a devolved and national context How to grow demand for rail in the new post-pandemic environment

The future of passenger demand A year ago, Steer set out four scenarios for future passenger growth, coming out of the pandemic. Since then, the latest data shows rail passenger demand grew by 16% in 2023/24, and a further 8% in the first half of 2024/25. This is in line with the most optimistic scenario, which could lead to 97% growth above the pre-pandemic peak by 2050.

A quick bounce back for passenger rail use to pre-pandemic levels in many areas is undoubtedly good news and provides a solid base for the future. However, Steer’s analysis also identified that half of the 16% growth derived from significant industry change – the extraordinary growth on the Elizabeth Line, and the reduction in industrial action – which the railway will not be able to rely on for growth going forward. However, growth at 8% per year would still be well above historic long-term annual rates of growth for passenger rail in Britain.

Securing continued growth remains vital, especially where it translates to revenue growth, which is a pre-requisite for improved financial sustainability and affordability, since government subsidy remains higher than in 2019.

Figure 1: Long-term passenger demand growth to 2050, Steer

There has been great variation in passenger growth across different geographies and journey types: demand growth since the pandemic is neither uniform nor a return to historic norms.

Journeys on the East Coast Mainline have experienced increased rapid demand growth, to above pre-covid levels, primarily driven by buoyant leisure travel, and open access operators. In contrast, the West Coast Mainline has seen lower demand – it has been historically characterised by business travel between the UK’s largest cities.

Demand for long-distance travel has recovered faster than commuter demand around London and the South East. Commuting patterns look different, reflecting hybrid working models, with demand for rail remaining higher on Tuesday, Wednesday and Thursday, and significant unused capacity on Mondays and Fridays. New approaches to use price, such as TfL’s off-peak fares on Fridays, have not been a financially sustainable way to drive up profitable demand.

Boosting rail freight to meet 2050 goals Enhancing rail freight capacity will also be essential to meeting 2050 sustainability targets, by significantly reducing road haulage. Freight growth of 8% is projected for Control Period 7 (CP7), similar to CP6, but achieving the Government’s target of 75% growth by 2050 will require running an additional 450 freight trains each day. To meet this target, investment will be needed to upgrade the freight network to ensure sufficient capacity. In particular, expansions of maritime and domestic intermodal facilities will necessitate improvements at key ports and stations, with particular focus needed to address constraints in the southeast of England.

Improving freight efficiency and aligning transit times more closely with air freight will also be crucial for long-term growth. To accommodate longer, heavier, and faster freight trains, timetable adjustments will be necessary, such as prioritising freight paths at weekends, potentially replacing some underutilised passenger services. Digital signalling presents an opportunity to enhance freight operations by increasing speeds, bypassing passenger services, and improving overall network balance.

A transport planning perspective A well-structured transport strategy is needed to balance transport demand alongside urban development. “The London Plan” is a well-established model for integrating transport with land use, particularly housing.

Londoners make six times as many trips, compared to the national average. The London Mayor’s Transport Strategy has established sustainable travel as a priority, with a target of 80% sustainable mode share by 2041. This requires a long-term strategy; while car usage has returned to 2019 levels after a rise during the pandemic, sustainable mode share remains unchanged (Figure 2).

Figure 2: Mode share in London over the pandemic An integrated, multi-modal approach is seen by Transport for London as a huge opportunity: 75% of drivers want more transport options, whilst only 13% say that they do not want to travel by rail. However, affordability will have to be addressed to achieve the potential.

Over one in four of the UK’s lowest-income households lacks access to a car, a figure that doubles in London, making it important to establish rail as a viable, affordable alternative.

Local authorities typically have a strong focus on local transport issues, but transport planning and funding decisions must still be transparent in order to justify significant investments politically. Data-driven decision making is crucial, and the benefits of decisions must be well understood. Whilst controversial with some, the Ultra Low Emission Zone has succeeded in influencing strong behaviour-shift, with 95% compliance and the rapid adoption of greener vehicles within the zone.

Growing rail as a national strategic investment Whilst devolved authorities have seized upon the importance of growing public transport as part of a sustainable transport strategy, there is no equivalent decision making at the national level.

Plans to grow rail use (both passenger and freight) should be part of integrated solutions to major national problems, such as strategies to address economic growth, housing shortages and decarbonisation. Enabling this will require a change in the way we look at rail investment decisions, along with a coherent view across modes.

Road traffic levels have returned stronger than previously, leading to increased congestion. While electric vehicles have become more affordable and easier to use due to expanding charging infrastructure, they cannot solve increasing peak-time road traffic.

Government policies will need greater consistency of approach within and across departments in order to shape travel behaviour, including consideration of fuel duty, road pricing and rail fares.

The role of the Green Book in appraisal needs to be considered, with wider (sometimes intangible) benefits being fairly weighted, but moreover, a clear strategic view is needed on the vision for, and value wanted from rail.

How to grow demand for rail Significant growth in rail is possible, but a key factor in restoring public confidence is ensuring a reliable and attractive product. For example, recent years have seen significant growth in the number of passengers using coach company National Express, with their customers reporting changing from rail to coach due to better value and reliability. There is an opportunity for rail to retain and bring such customers back, but it will need to demonstrate the reliability and value for money that customers prioritise.

The railway needs to be positioned as a positive ‘product’ that can compete with cheap aviation and coach travel, but this requires a focus on what drives customer satisfaction: value for money (rather than affordability) and reliability. Prioritising customer value and reliability in both the provisioning and design of rail services could unlock a new era of rail growth. Open access operators, with strong commercial incentives have shown considerable success in filling previously empty seats, and demystifying ticketing may also be an important strategy, as we need to persuade people that their rail fares represent the best value.

Success in growing revenues by focusing on the customer An important success story is Greater Anglia, where revenues have risen by 10.2% above pre-pandemic levels; an example of what is possible when businesses are driven by company cohesion and ‘tunnel vision’ towards a revenue action plan.

Greater Anglia have seen significant increases in customer satisfaction ratings, in large part due to a 50% reduction in cancellations and major falls in delay minutes since the pandemic (Figure 4). Investment in a modern, accessible train fleet, supported by government funding, has further encouraged ridership, whilst effective marketing, including the successful "Red Hare" campaign, has delivered a return of £6.30 for every £1 spent on advertising.

Additional measures such as dynamic timetable adjustments, live route mapping, effective management of advance fares, and strict ticket enforcement have all played a role in safeguarding revenue. Greater Anglia’s data-driven approach also brings with it more devolved accountability, with teams required to justify service performance, which in turn ensures operational efficiency and greater performance.

Figure 3: Punctuality data (Thousands of minutes), Greater Anglia

Meeting the needs of modern passengers The rail industry now needs to find ways to identify customers who can be influenced, and then build targeted offers to meet their specific needs.

One particular source for optimism is that younger passengers are travelling more often by rail than before the pandemic. Steer’s analysis of the age of passengers (figure 3) is revealing, showing that one of the key groups to target could be 17–29-year-olds. We need to engage with this group to increase understanding of their needs and shape the railway of the future to suit them. In turn, this could create a new generation where rail travel becomes second nature.

Figure 4: Average number of rail trips per year by age, Steer

A more inclusive railway The trends above all point to the need to think hard about all customer needs if we are to achieve ridership and revenue growth in line with the long-term potential that exists.

Improving customer experience presents a different opportunity for growth, which can be achieved through differentiated services at varying price points, already seen regularly on railway networks in Europe. At the high-end, features such as onboard restaurants, private cabins, and mood lighting could enhance passenger satisfaction and attract new higher spending users.

Making the railway more inclusive is crucial. Reliable Wi-Fi and workspace areas are needed to cater to Gen Z and remote workers. There is huge unmet potential ridership for rail travel from people with mobility challenges, who take far fewer trips but could be supported to access much more of the public transport network through step-free access and clear information provision. Factors such as sufficient toilet facilities can help accommodate parents traveling with young children. Safety, in the broadest sense, is important to making all people feel secure when using the railways.

Understanding and delivering on these design requirements will revolutionise the offer for passengers, and change the way that railways are used. A workforce that reflects the diversity of its users will be better equipped to understand and respond to different transport preferences and requirements.

As rail reform progresses, the industry must look outwards to understand the different and changing needs it serves, if we are to secure the growth potential that exists.

Get Involved Further questions for discussion: • Given demand amongst certain age groups will rise faster than others, how can we target growth in these groups whilst continuing to maintain current demand?

• How can the balance be struck between optimising the passenger experience, whilst optimising infrastructure and engaging in new projects?

• How can we learn from the operations and offerings in other countries?

• Given the freight growth target of 75% by 2050, how can the railway balance significant growth for both passenger and freight demand, without cost-heavy new infrastructure? How could private investment play a role?

Throughout the 200th anniversary year of rail, RIA will be running a series of events delving into different areas of rail, asking what the future needs to look like, and how we can all help to shape it.

To find out more or register, scan the QR code or visit www.riagb.org.uk