The pandemic and spiralling construction inflation has pushed the cost of the South Wales Metro rail infrastructure project to the £1.bn mark.
The flagship transport project of the Welsh Government will see the Rhymney, Aberdare, Merthyr and Treherbert lines into Cardiff electrified for a new turn-up-and-go network - with the Coryton and City lines in Cardiff also being upgraded.
Chief executive of Transport for Wales, James Price, said the project will come in around 40% more than the original forecast of £734m and be mainly completed in 2024, Full implementation of a new timetable, that will see a significant increase in service frequency and capacity with new tram-trains and trimode rolling stock, is on track for 2025. While Transport for Wales, utilising the operator of last resort mechanism, took over the Wales & Borders rail franchise from KeolisAmey (the joint venture between Keolis and Amey) in 2020. However, the electrification project still involves Amey under the management of Transport for Wales.
The original budget, set back in 2016, consisted of £164m from the European Union, £445m from the Welsh Government and the £1.3bn City Deal for the Cardiff Capital Region and £125m from the UK Government.
With double-digit inflation impacting capital projects across the UK, the overspend on the Metro will not come as a surprise. There have been a number of examples - and without the current inflationary headwinds - of even higher budgetary overruns in recent years. When originally announced by then Prime Minister David Cameron in 2012, electrification of the Great Western Mainline to South Wales from London was expected to cost £900m.
Latest figures show that even with the ditching of electrifying around 60 miles of track between Cardiff and Swansea, it still incurred a cost of £2.8bn. London’s Crossrail project also came in significantly over budget, while the high speed two - which is classed as an England and Wales rail project so providing no Barnett consequential for the Welsh Government - is facing further delays and spiralling costs.
While there could an argument that as a funder the UK Government should pay a proportionate part of the increased cost, the additional capital required for the Metro will be borne by the Welsh Government. However, the Cardiff Bay administration for its current about to end 2022-23 financial year has for the first time - after years of under utilisation - used its full borrowing powers under the Wales Act to draw down £150m for capital investment from the Treasury.
Repayable over 25 years, a significant part of it is being assigned to the Metro. For the 2022-23 financial year the Welsh Government has also provided a passenger subsidy for Transport for Wales - the transport body of the Welsh Government - to operate the Wales & Borders franchise of £258.6m. Its revenue last year generated from passenger fares was around £140m.
Mr Price, said: “In terms of progress I would say we are three-quarters through the project (Metro). Obviously this is a high risk scheme and if you look at any other major rail infrastructure projects in the UK they have all gone a bit wrong, and some of them very wrong. The complexity of what we are doing on the Core Valley Lines is often not recognised as we have new trains and signalling. This is proven technology, but it has never been integrated in one project at this scale.”
On the current projected cost of the project, which covers around 170 kilometres, Mr Price added: “At the minute we are talking about a round figure of £1bn. If you add a year to the programme because of Covid, and then plug in the higher inflation figure that we have seen, compared to the level that was predicted, you close around 75% of that gap. The rest of you could point a finger at me and say 'James you could have done a better job', but exactly at that point we are over by about £100m which in the context of this project we are outperforming everything else.”
Mr Price said the rise in the cost of concrete and metals were the two biggest contributors on the inflationary side. The chief executive added: “However, the main driver of the cost is the length of the programme so anything we can do to finish it earlier the better. However, whilst people will be able to use it by 2025 (entire network) we then have to go through a whole process of final documentations through an ORR (regulatory in the Office of Rail and Road) perspective and that is very expensive. So, that might be another year, but I want to compress it as much as possible as that is where we can maximise cost-savings. At the moment we have the best part of 1,000 people working on the programme and If you think of the sums involved, if we can save a couple of weeks, it adds up to a lot of money.
“So, it’s not easy, but it is still going to plan. The difficulty is ahead of us in terms of entry into service. However, in the next three to four months we should see tram-trains being tested on the Treherbert, Aberdare and Merthyr side of the network with driver training, so it is becoming very real very fast. We have also had the first tram-trains (manufactured by Stadler) arriving at our depot in Taffs Well.”
New rolling stock
The first tram-trains operating from the Heads of the Valleys are scheduled to enter service in 2024. The Rhymney Line (where trimodes will run) will be completed in 2025. On the Rhymney Line new diesel trains have entered service and will be transferred to other parts of the Wales & Borders network once the trimodes (which can operate in diesel, electric and battery mode) are delivered. The chief executive, who was previously a deputy permanent secretary at the Welsh Government, said:” So, we are just over a year delayed, but I still stick by us being months not years behind on the basis that some things we have brought forward like on the Rhymney Line where we have got the new rolling stock far earlier than we were planning for example - although it is not electrified yet.”
Due its signalling technology on the Treherbert Line dating back to the 1930s from Pontypridd north it will be closed from April until early 2024. Alternative bus services will be provided. However, on the other lines disruption will be less intrusive with weekend and overnight electrification work.
Going forward the biggest operational cost on the Metro will be staff related. Unlike driver-only tram-trains and light rail vehicles on most light rail networks, like those in Manchester, Tyne & Wear and the London Underground, the Valley Lines will also have guards on tram-trains that will have to operate to heavy rail specifications. This will mean they will not be able to travel as close together than if able to utilise line of sight signalling.
The heavy rail solution designed by KeolisAmey will also mean, as currently timetabled for, just two trains an hour on the most densely populated sections of the Metro along the Coryton and City Lines in Cardiff. Hong Kong-based transport firm MTR, which was the other final bidder for the franchise and electrification of the Core Valleys Lines - would have provided at least four an hour on the Coryton Line and set out plans for four on the City Line - although the whole network would have required de-designation by the ORR from heavy to non mainline light rail.
Asked if the competitive procurement process, which saw KeolisAmey named as the winner bidder in 2018 - and at one stage had set out a goal of four trains an hours on the Coryton Line - was in hindsight the least effective outcome, Mr Price said: “You can justify different views on this to be honest, but from my perspective and taking everything in the round, I do think it was (right) because if someone had rocked up and said we want to put a rail notice closure on for two years and then we are going to reopen it as a light rail network (although MTR proposed a phased approach) I am not sure what the political chances of getting that through would have been.
" Plus at the time there were a whole host of deliverability questions around how that would have worked. What we have bought is the ability to run light rail, but running it to heavy rail standards. However, it doesn’t mean that we cannot go at a later date and amend some of those standards. In terms of the route from Queen Street to Cardiff Bay that is all being done under tramway rules and we have already applied to the ORR and there are no objections to us doing that.”
The reasons why the Cardiff lines are constrained to two trains an hour is the limited capacity through Network Rail’s Cardiff West Junction in Canton and a single-track section on the Coryton branch line. To fix these issues would require an investment estimated at £50m.
Mr Price said rather than moving existing train capacity from the Heads of the Valleys to the two Cardiff lines, investment was the way forward.
Some argue that if tram-trains on the Heads of the Valleys were reduced to say three an hour - still an improvement on the current diesel operation - and redeployed on the Cardiff lines their increased passenger usage could soften the impact of a projected rise in Welsh Government subsidy support. Moreover, whether the Welsh Government, with its close workings with train unions, would have the appetite to generate operating cost-savings by removing the need for guards on tram-trains - even if offset somewhat with new roles created elsewhere in customer support on the network - is unclear.
Speaking from Transport for Wales’ new HQ in Pontypridd Mr Price said four trains an hours from the Heads of the Valleys should remain. He added: “I think public transport has to be for everybody and the whole turn-up-and-go narrative around Metro was around stimulating demand and model shift (less car journeys) so we shouldn’t turn that off. I don’ think there is any political interest in doing that, but the challenge is making the case and funding it. So. I think you do it (increased Cardiff line frequency) without taking away what has already been promised."
Passenger trends
On the overall franchise, which includes services that travel across the border into England, Mr Price said it has potential for significant rail passenger growth. While it varies in different parts of Wales - with the core Valley Lines at just over 10% - only around 3% of journeys in Wales are made by train. Mr Price said doubling the current rate was far from being unachievable as growth would come from a low base.
While rail passenger numbers on the Wales & Borders franchise have yet to return to pre-Covid levels, revenues have. This is due to an increase in people taking longer train journeys. With working from home levels in Wales now around 30%, Mr Price said that travel to work patterns have become more nuanced.
He added: “One of the reasons I don’ think all the off peak travel in the day is leisure is that we get a massive peak in evening when people finish work. So, I think people are doing a bit of work from home and then going into the office later on. However, Fridays, Saturdays and Sundays are very busy and Mondays less so, though the peak has come back strongly in the evenings with a more evenly balanced day.
“If there is genuinely less demand at times we can amend services as we are not locked into anything. You could connect two trains together and run them less frequently for a portion of the day.”
Integrated public transport
The future of public transport in Wales will see greater alignment between bus and train services. And under new legislation being taken forward by the Welsh Government, in return for public subsidies, franchised bus operators will have to provide services to prescribed locations and time tables. This will provide a more joined up public transport network and in some cases local authorities setting up new municipally-owned bus companies, as is the case currently with Newport and Cardiff bus companies. But what would be the role for Transport for Wales in a new world of joined up public transport and supporting the Welsh Government’s aim of seeking to reduce car journeys and reach net zero?
Mr Price said: “Local government, in one way or another, will have an important part in the design of those networks and making sure there is some kind of democratic link to those services that are built. However, if you want one network, regardless of mode, with one ticket and timetable, you can only do that in one place. So a lot of the technicalities around bringing that together, and the operational management of it, needs to be done by Transport for Wales.
" However, we do not necessarily need to take strategic decisions, which can be made by the Welsh Government or local authorities. It’s the same with rail in that we don’t decide where say the next extension of the Metro is going to be, which is a combination of Welsh Government, local government and maybe the UK Government if there is Levelling UK Fund bids. What I would hope is that our advice would be taken into account in that mix and that we would then be asked to deliver it, which is broadly where we are now.”
On the decision to enact the operator of last resort, Mr Price said that Covid had effectively wiped out KeolisAmey’s business model for the Wales & Borders franchise - which was only a few years into a planned 15 years schedule.
He said: “They didn’t want to go away and would have preferred to have stayed with a profit margin. However, that would have cost us more than the situation allowed and it is genuinely no more complicated than that. We tried to do something that was good for the public and not too bad for them. However, if rail is turning over £300m with all of the changes (passenger numbers significantly reduced during the pandemic),if you then put a 3% or 4% profit margin on that, it would have been quite a big number.”
The move saw KeolisAmey staff on the franchise transferred into a new rail services company under Transport for Wales. However, it is not a legally permanent arrangement and in theory it could be outsourced under a new franchise operating agreement.
Services to London and Bristol
Transport for Wales is currently not allowed to run services to Bristol or London. As well as plans for six new stations on the South Wales Mainline -as recommended in the Burns Commission to improve rail capacity after the Welsh Government’s decision not to proceed with the £1.3bn M4 Relief Road project - both Transport for Wales, the Welsh Government and cross-body organisation the Western Gateway Partnership, are pressing for electrification to Temple Meads station in Bristol. With investment from the Department for Transport, and use of existing relief lines, this could more than double the number of services per hour from South Wales to the centre of Bristol from the current two an hour.
Mr Price said: “We would love to run services to Bristol and London. Firstly it would be around connectivity and secondly because we would probably make money from them and reducing the subsidy cost for the Welsh Government. So, providing you have got the rolling stock and a depot it would not be difficult to do. While running more trains into areas where you can make money rather than subsidise I don’t see as a core purpose of Transport for Wales, cross-subsidy could be.”
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