GB Railfreight… ever expanding

About halfway through our conversation, John Smith turns to a folder and looks for a map of the planned ‘Electric Spine’ route to Southampton.
“West Ham,” he says. “We have to play them, and Norwich.”

He is looking for the map to illustrate a point he wants to make about the ‘Electric Spine’ route, something that he cannot fathom happening. But he gets sidetracked when he chances across a fixture list for his beloved Sunderland football club, which is never far from his thoughts.

It is a topic he nearly always brings up when chatting with RAIL. Overlooking his desk in his London office, next to pictures of his business through the years, is a signed Sunderland shirt. His passion for his football team almost - almost - rivals that for his business.

Smith is Managing Director of GB Railfreight. Engaging company, he was described by someone who once worked for him as “a proper railwayman”. It’s rare to hear a bad word about him.

Smith has led the company from a workforce of one (him) in 1999 to a firm that is now the third largest in the rail freight sector, with a turnover of £100 million (set to rise to £150m by the end of next year).

It has just bought the largest number of locomotives in one deal since EWS bought 250 Class 66s in 1996. These locomotives are required because of the contracts that GBRf keeps winning.

His company is also innovative. GBRf is revamping 50-year-old locomotives with brand new diesel engines that offer twice the power, enabling them to operate across the UK.
It has imported locomotives from abroad, to meet a chronic shortage of motive power.

And in the early days, it ran specific dedicated intermodal trains on which individual companies could buy individual spaces.
Within a year of entering the coal sector, it had 12% of the market. And today, it is the single biggest operator of biomass traffic in the UK - a market it wants to grow still further. GBRf was also the first to break Freightliner’s stranglehold on Felixstowe.

The firm has also been instrumental in London’s transport regeneration. It hauls Bombardier’s new S-Stock trains from the Midlands (where they are constructed and tested) to London, and has won contracts with Crossrail to move materials to and from various sites. In addition, it operates intermodal trains through the city, carrying items that will find their way back to London in the hands of consumers.

RAIL meets Smith in December, in his office near Liverpool Street. This is a busy time for GBRf. It has just won a deal to operate sand trains from Norfolk, and a deal with Network Rail to operate the latter’s National Delivery Service (NDS) trains in the East.

A new contract with Crossrail has recently started, biomass work continues to expand, and the intermodal sector is bouncing back after a shaky period during the recession. More new flows are in the pipeline.

The sector as a whole is performing well. The Office of Rail Regulation’s 2013-2014 Quarter 2 Statistical Release on freight rail usage, published in mid-December, showed an 8.9% rise in rail freight moved, compared with the previous year.

“It’s important that the Government recognises the contribution the rail freight sector makes to regional and national economic growth, and creates an environment that allows it to continue to expand,” says Smith.

“These figures are also interesting because they illustrate the rapid economic expansion experienced across the rail freight sector, despite capacity constraints on the network. Since privatisation, the story of rail freight has been one of great success, with growth of up to 60% in 20 years.

“GB Railfreight, in particular, embodies this success, having developed from a company of just two employees and zero contracts in 1999 to one with a turnover in excess of £100m. In 2014, we will be looking to expand and further develop our bulk materials, intermodal, railways infrastructure and rail industry services businesses.”

It’s the regeneration of London that Smith is keen to discuss first. Another of GBRf’s contracts was one signed with Metronet almost eight years ago. This was a key innovation, as it entailed the acquisition of main line locomotives and wagons for use on the London Underground. A yard was opened at Wellingborough to accommodate trains.

“It was for the renewal of infrastructure on the Metropolitan, District and Hammersmith & City Lines,” recalls Smith. “The logic was high-capacity renewal. That has rolled out and been very successful.”

The connections with London Underground didn’t stop there. In November 2013, two Class 66s were repainted into liveries depicting the LU system.

“We got involved with LU and LU150. Sir Peter Hendy has an interest in what we do, and we wanted to celebrate.”
Smith says credit is due to Hendy, for the transformation of the Tube.

“This Tube is one of the best. It is a generator of growth. I’m genuinely amazed by the growth. And that is from the way the system has grown.

“I came in once from the LTS , and it was like a ploughed field. But now the Tube is immaculate.”

“We have been involved in the regeneration. We have a unique selling point here. We work with Transplant . Their drivers relieve ours when working in possessions, and they drive our ‘66s’ under 10mph in possessions.”

Smith sees GBRf as London’s freight operator. “There is the important issue of freight to and from London. Freight is important to the construction of Crossrail, and the renewal and upgrade of LU. We bring other materials in. Intermodal doesn’t stop there, but it will come down the M1 in lorries to reach London after we have delivered it.”

Smith says the involvement of his trains in the construction projects shows the key integration that rail has to the development of London. And he is looking around for further ways to grow his business in the capital, naming Cricklewood as somewhere that could be used as a terminal.

“There are key strategic sites we are looking at,” he says, further suggesting that the aggregates market is an area he is keen to exploit for traffic.

But there is much more to GBRf than London. And it’s the company’s approach to dealing with people that is proving a successful formula for winning contracts.

Take the recent deal with Sibelco UK. Starting from January 2, GBRf operates trains from Middleton Towers (near King’s Lynn) to Guardian Industries’ UK plant in Goole (Yorkshire) and to Ardagh Group’s UK glass sites in Barnsley and Doncaster. Two trains will run each day to the three locations.

Guardian Industries will use the sand to produce windscreens for automotive applications, and flat glass for building and commercial applications. Luxembourg-based Ardagh Group will use it to manufacture glass containers.

“Sibelco has been producing and supplying advanced minerals in the UK for over 300 years, and is an important link in the domestic supply chain,” says Smith.

“This contract is a great opportunity for GB Railfreight to support the UK supply chain, to continue boosting growth in our manufacturing sector, and to exemplify the pivotal role played by UK rail freight in keeping Britain’s economy moving.”

Katherine Vivian, Sibelco UK distribution manager, says: “From our first meeting with GBRf, there was a very positive feeling to the talks. We found they had a proficient set-up, terrific profile, and great people throughout the organisation.

“Furthermore, they realised we would demand quality, and that (in line with our own ethos) going above and beyond the norm would be essential.

“Sibelco is determined to forge ahead with its business across Europe, and to do that we must have the right infrastructure and the best people. In GBRf we have found all that and more.”

Praise indeed, although Smith believes the company’s flexibility has also helped.

However, the continued winning of contracts has thrown up challenges, most notably around motive power. GBRf has a limited number of locomotives, and its fleet is in almost constant use (unlike other operators). For example, at the end of 2012, GBRf had 45 available Class 66s. And it needed every single one.

It has been well documented that the company acquired five Class 66s from overseas, and following modifications all are now in use in the UK. But that was still not enough, so last August GBRf bought eight brand new ‘66s’. These will be delivered from July 2014.

And more are still to be delivered - in total, GBRf will take delivery of 21 brand new Class 66s that will be used on new flows.

They will be joined by 16 Class 92 electric locomotives that the firm is buying outright from parent company Eurotunnel. And at least five Class 73 electro-diesels are being rebuilt and fitted with new engines, offering them much more operational flexibility (see pages 26-27).

But why buy Class 66s? Rivals are buying newer designs that are more powerful.

Smith defends the decision: “Freight operation is like British Rail. You cannot afford an engineering risk. The market is driven by operating leases, and throughout the growth of the 2000s we used to add another five when we won work. We cannot do that now.

“We have had to grow. This is generated by Eurotunnel. They get what we are up to. I cannot encumber it with debt, so we have to persuade them. I have to get approval.”
That approval has been earned. “GBRf has secured those assets we need for our growth. That is enough to take us there .”

Smith says the firm will record a turnover of £108m. And there are plans for much more growth.

“The five-year plan is to push the business on again. We have 12% of the UK rail market. There are more than enough opportunities for organic growth. I assume we will reach £150m turnover by the end of the plan.”

He is also keen to see investment in the railways, although not necessarily where the money is currently being spent. Smith is vocal about the ‘Electric Spine’ from Southampton to Sheffield, and how he believes there are better alternatives.

“Nuneaton-Birmingham makes more sense. Felixstowe to Peterborough will cost a lot of money, and we are calling for that.

“I have spoken to Claire Moriarty about it. Other operators do not want wires there because they have diesel fleets and you have to use your assets. You cannot afford to ditch assets, because companies will then not finance deals. What you could do is look for work.”

Smith has a fleet of currently underused electric Class 92s. But work has been identified for them - one has started working between Trafford Park and Ipswich, while another now operates trains in Scotland. A third works through the Channel Tunnel to Daventry.

Smith believes certain areas for work have to be identified.

“Look at CP5 and CP6. CP4’s focus on freight was mostly intermodal. Money must be spent on capacity. There are redundant locomotives that could be used for this. Electrification could be used on infill projects. Old traction could be rebuilt or refurbished.”

Where could be done?

“Nuneaton to Birmingham and Felixstowe to Ipswich.”

Smith is adamant about these. “CP6 is about cross-country routes. Felixstowe has capacity for another 20 paths. London Gateway is to develop. GOBLIN will develop.

“Intermodal is the only business scope to electrify routes. But many cannot afford to buy new electric locomotives. So you look to smaller slices of work.

“Felixstowe is an obvious place to run electric trains out of. That works. Nuneaton would be the next stage. CP6 should look to get Ipswich to Nuneaton done. The two small infills done in CP5 would encourage that.”

He adds: “Capacity for other commodities is vital for CP5. Loops and electrification are needed, in my opinion. Capacity is about enhancing performance.

“Look at Immingham. Coming out of there is a Victorian network. We need flexibility to integrate with ports, so investment needs to go into capacity.”

Smith cites other port access where capacity is required - Hull, Tyne, Tees and Liverpool. “These ports generate freight for cars and coal. The connections into them need to be enhanced.”

Another area is the Pennines. “That needs addressing. It is not for 9ft 6in boxes, it is about loops. We need to integrate.

“Intermodal has had money. We need to exploit electrification for short sections, and then it is about bulk flows and capacity.”

Smith cites the number of stored electric locomotives across the UK, to illustrate that these plans could be viable. And they will bring benefits for the railway as a whole, he says. For example, electrifying across the Fens would offer East Coast expresses the opportunity to divert via Cambridge.

What other aspects of GB Railfreight’s business are growing?

“Biomass is, dramatically,” he says. “Drax’s development of biomass is clear. The conversion of a boiler for biomass use has been a success, and the plan is to convert three of the six boilers to biomass. We are building new wagons to support the work.

“Coal has grown, too. And aggregates and Network Rail business.

“Car traffic has opportunities. Car manufacturing is ebbing and flowing. Cars built here are going abroad. Looking at economics of the business, that is positive. It is lifting the UK out of the mire. If you go to the Port of Tyne, cars are being exported to Japan.

“For aggregates, the market has changed dramatically. For years, how it worked related to how rail worked - Mendips traffic into Acton, LaFarge traffic around East Anglia, and smaller aggregates around Leicester. Other work overlapped.

“But takeovers mean that the geography has gone, and that has started to create a new dynamic. The traditional market has changed, and there are new people in there now.”

Smith says the industry is recovering from the recession. “It’s not booming, but it is an opportunity.”

He argues that GBRf’s use of assets is better, which affords the company the chance to gain these “opportunities”.

He explains: “We know we have Class 92s coming. That means we can cascade Class 66s. Before more electrification we can use the ‘92s’ on certain jobs. We have to get the fleet consolidated.”

A key consideration in GBRf’s use of assets is performance.

“One of the biggest attributes is FOC on TOC delay. We are incentivised to get performance right.”

And Smith raises one final point. “We would argue that we pay variable track access, but we are sacrificed when there are delays.”

He explains the delays that happen: “We have to manage suppliers. We cannot depart until a bulk train is loaded or unloaded.” 

• This feature was published in RAIL 741 on 5 February 2014