An Important Difference – Structural Or Cyclical Decline On The Railways?

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This is an interesting little spanner being thrown in the works. For we’ve – as we all too bloody well know – that insistence that we must all be paying much more in taxes so the politicians can go build new train sets. But we’ve also got a decline in passenger journeys. At which point we’ve got to work out why that decline – is this a structural change in the economy or is it a cyclical one? If it’s the latter, then there could, and note that it only is could, be a justification for all that mawing about infrastructure. If it’s a structural one then there’s no justification at all. In fact, going and building would just be making us poorer.

It’s a fairly important distinction to be making that is.

At the root of the collapse of the Virgin Trains East Coast franchise, confirmed this week, was the expectation that rail passenger numbers could go only one way: up.

Two decades of consistent growth had fostered the assumption that demand would keep rising, the only question being how high.

That assumption has been proved wrong. Instead, demand has dropped not only on mainline inter-city routes but on commuter rail franchises and London’s tube network, where annual numbers are down 1.5%.

Well, no, the East Coast is rather more specific than that. Network Rail promised to upgrade the line, they didn’t, therefore projections and prices based upon the upgrade were wrong.

But that more general decline in passenger numbers, it is important:

Stephen Glaister, emeritus professor of transport and infrastructure at Imperial College London, says it is unclear whether the slowdown is a blip or a longterm trend. “Who knows? That’s a question about Brexit and the state of the economy. Rail travel is particularly sensitive, as it is disproportionately used by higher income bands and people in work.”

More people working from home or irregularly, as suggested by falling season ticket sales, could spell a longer-term decline. However, Glaister pointed to the impact of strike disruption and poor performance in the south-east, which accounts for 70% of rail journeys in Britain.

An increase in online living – whether shopping, watching films or ordering food – has cut trips to the high street, cinemas and restaurants. The biggest growth sector in transport is in light commercial vehicles, or vans. The transport policy expert David Begg says this has a direct impact on bus travel. “A third of bus passengers are headed to the shops, but retailers are making more and more money online – that’s a structural change,” Begg said.

We do know there are significant structural changes going on. Some 10% of the High Street is empty these days, some 10% of retail sales are online. This is not a coincidence. We’re simply not going to need all that retail space in the future. Might as well convert it into that residential that we do seemingly desire in fact.

Is the same thing happening to trains? Hmm, well, exactly the same perhaps not for it’s not obvious that all that many people use trains to go shopping. But the wider thought, that we’ve less moving around for production reasons – commutes to work etc – rather than social – going on a leisure trip – might well hold true. Meaning that we’ll need fewer, not more, trains in the future. Do note that the economic justifications for new train sets all depend upon those production uses. We cannot make the sums add up for any upgrades at all without assuming that it’s people going to work. Sure, leisure is nice and all that but it’s not of a high enough value to cover the costs involved.

We don’t actually know the answer here. My own suspicion is that commuting for work is in decline, secular decline. Broadband, above all else, just makes it less necessary. No, I don’t mean that all will work from home beginning on Tuesday afternoon. But that enough of us will, often enough, to reduce passenger numbers. And thereby entirely kill any economic justification for more train sets.

As, actually, my own earlier analysis shows that there is no economic justification for HS2 at all.