Joint note of Network Rail supplier updates: November 2024

Joint note of Network Rail supplier updates: November 2024 We have been in conversation this week with Network Rail, following our Trade Associations raising concerns that many rail suppliers are reporting a serious hiatus in expected rail work at the start of Control Period 7 (CP7).

On Monday 4 November, Network Rail held an online update and Q&A for suppliers to hear from and put questions to senior representatives across Network Rail’s regions and national functions.

This note summarises our understanding of the key information shared by Network Rail over the past week, and the next steps.

Context - situation Network Rail provided an update on a number of factors affecting their spending through the supply chain.

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The supplier spend at the start of Control Period 7 (CP7) is lower than the spend in the last year of CP6, but it is similar to the average of CP6.

The start of CP6, particularly in renewals, was far lower in cash prices than in CP7 in the same period. Adjusting for high inflation towards the end of CP6, supplier spend is slightly higher in real terms at the start of CP7 compared to what it was at the start of CP6.

At the end of CP6, inflation, industrial action and impact of the pandemic meant that not all planned work could be completed on time within the available funding. As a result, a significant amount of work planned for CP6 has had to carry into CP7 - using budgets for the first year of CP7.

Network Rail explained that many CP7 contracts have been let, as planned, and that Tier 1 contractors on frameworks have visibility and budgets to spend. However, there was recognition that supplier spend does vary by asset and region and the budgets have not necessarily flowed to suppliers at Tier 2 and 3 yet.

Enhancements budgets: Although CP7 covers renewals and maintenance budgets, it does not provide the funding for enhancements. This comes through separate government approval processes requiring Treasury approval. Government has not yet decided on many rail enhancement projects, with some important decisions moved back to the 2025 Comprehensive Spending Review.

Network Rail acknowledge the last 12+ months are likely to have felt changeable for the supply chain because of significant overplanning and changes at late notice, as well as communication with the supply chain being inconsistent.

Network Rail recognise the difficult position many suppliers are in, in the current landscape and are committed to improving ways of working with them, balancing this with delivering what the railway needs. They also thanked our associations and their members for raising their concerns. 1

Clive Berrington, Group Director, Railway Business Services; Andrew Haines, Chief Executive; and Anit Chandarana, Group Director, System Operator; also represented Network Rail at the Rail Industry Association Conference on Thursday 7 November, where they spoke further on the topic.

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Commitments by Network Rail Network Rail recognised that communication with suppliers has not always been good, and that there need to be improvements to the quality of pipeline information.

Specifically, Network Rail has committed to: • • • • •

Improved quarterly pipeline information, in a harmonised format across all regions from Spring 2025. Network Rail have advised they are actively working on improvements to the pipeline document to improve the data and make it easier for suppliers to navigate.

Sharing plans around pipelines with Trade Associations to improve how they are communicated.

Working more closely with the CP7 Tier 1 suppliers to understand the blockers to getting work started and ensure pipelines are widely shared.

Providing timely, centralised information on all supply chain engagement events.

More regular touchpoints with the supply chain.

Network Rail has also invited suppliers to collaborate on next steps, by: • •

Working together to seek greater pipeline clarity from Tier 1s and 2s Continuing to focus on a shared commitment to efficiencies.

Last week also saw the launch of the new Network Rail CP7 SME Strategy, which confirms that Network Rail have continued to meet their target SME spend of 33%, with an approximate 50/50 split of direct and indirect spend. 2 Next steps As Trade Associations, we will work with Network Rail in a collaborative way, whilst also holding them to account towards the commitments made above. In particular, we will ask for: • Network Rail to share a transparent pipeline of its renewals and maintenance work, in a common, easy to use format, including visibility of Network Rail’s own plans (even if these are not fully finalised). On enhancements, we will ask the Government to provide (or allow Network Rail to publish) a transparent forward pipeline of projects.

• We have requested stronger national level oversight within Network Rail, which they have agreed to explore and/or bolster, including: o Active oversight of the health of the supply chain, o Integration of pipeline across the business to help suppliers understand the work opportunities across the whole business. o Understanding how work pipelines and budgets are flowing to SMEs and suppliers who do not contract directly with Network Rail • An open and collaborative culture between Network Rail and suppliers that supports a healthy and competitive supply chain, including: o Named individuals to speak to in each region for suppliers facing challenges o Agreement to publishing a good practice principles document for engaging with suppliers, and vice versa - that is shared right across Network Rail’s business and our members o Continuous feedback - in both directions Network Rail and the supply chain need to work together – all the way down the supply chain – to ensure we will have the right skills to build and maintain high quality infrastructure that delivers for passengers and freight customers.

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Approximately 3,000 SMEs benefitted from £1.29 billion worth of business in the last financial year (23/24).