New freight entrants and the obstacles they face

The newest entrant to the rail freight market is parcels carrier Varamis. Paul Clifton asks founder Phil Read what he needs from an incoming government for his venture to thrive.

In a nutshell: more freedom,” says a weary Phil Read. He’s been up half the night, sorting a problem with his service between Birmingham and Glasgow.

“If you want me to moan for an hour about the challenges facing a new disrupter to come into the industry, I can do so. Because I have some stories for you!”

Varamis ran its first service in October 2022, aided by a government “first of a kind” grant. Read spotted a gap in the market for carrying parcels by rail, using converted passenger trains that were no longer needed. Based in the Midlands and serving Scotland, it would take overnight lorries off the M6 motorway.

But the real prize will be delivering parcels into central London, where lorries are hampered by congested roads, tough emissions regulations, and high costs.

“I had a very simple idea,” Read explains.

“I’m a train driver. I worked at Connex back in 1999. I worked at GNER under Christopher Garnett for five years. I went to Taiwan for two years. Great Western out of Paddington. Then Thameslink for five years.

“I started talking with Eversholt. They were converting some trains for express rail freight, and that was exactly the space I wanted to be in - repurposed passenger units that are high-speed and fully electric.

“I didn’t have a big backer. It took a couple of years to jump through the hurdles.

“The biggest challenge was getting our licence. We didn’t just have to prove we were safe, we had to be economically sound as well.”

But Read doesn’t have a harsh word to say about the Regulator. Getting into the system was hard, but once through the door he has found the Office of Rail and Road to be helpful and not intrusive.

“The real challenge was getting buy-in from other people on the railway. I never expected so much push-back from individuals. Probably a dozen people tried to stop what we are doing. There is a lot of protectionism on the railway.

“Andrew Haines pointed it out very clearly when he found himself in a spot of disruption outside Paddington. He said the response was disjointed because there are so many individual actors on the railway.

“That’s it - that’s what stops the railway from being as good as it can possibly be. Too many people see risk from their own perspective.”

A surprising observation, perhaps, coming from one of those individual actors.

Varamis runs one trip each night, Monday to Friday. It aims to start a second nightly train soon.

At the southern end it uses Birmingham International - a station between the National Exhibition Centre and Birmingham Airport, and close to the M42 motorway.

In Scotland it uses Mossend - a freight yard near Coatbridge (east of Glasgow) with access from the West Coast Main Line and close to the M8 motorway.

“Birmingham International is a managed station on behalf of Network Rail,” Read explains.

“That means, despite having gone through a big regulatory process, we are then required to meet all the terms and conditions of another train operator at that station. We are treated like a contractor, when in fact we are an operator,” he says.

“During our first journey from Mossend to Birmingham, back in October 2022, I was on board, getting a call from the station manager saying that we would not be allowed in his station,” Read complains.

“That tells you everything you need to know. I had my train, I had my licence and safety case, I had my train path, my operation was deemed acceptable by the Regulator. I was at Preston on my way. But someone else, not even a rival, was looking for reasons why we couldn’t do it.

“Facilities and sites around the UK that are predominantly owned by the government, via Network Rail, have been given to the operators with no care taken about how they can be used by multiple operators.”

Read continues: “The charges at Mossend are extortionate. We will have to stand that service down soon, if they continue to make access as financially unviable as they have for the last 18 months.

“If it was a private site, I would get in for a realistic commercial price. It was given away in the 1990s for £1 a year on a 125-year lease, and we are being held to ransom by the operators of it. They can charge us so much that it is not viable.

“This is a learning lesson for a future government: don’t give taxpayer-owned land away on leases that are longer than any of us will live. Easier access to platforms and terminals is key to growing our part of the railway.”

For three months, Varamis claims a 100% punctuality record. Its train departs Birmingham at 2350 and arrives at Mossend at 0400, ahead of its 0434 slot.

Varamis is now planning a two-week trial into central London. It has ten four-car Class 321 trains, of which five have been converted to carry parcels. It is looking to convert the remaining five later in 2024.

“We have a simple and effective service. We are very lean - we stand on our own two feet.

“We are just like Lumo or Hull Trains, but we carry parcels instead of people. We integrate with passenger trains, we run fast, and we don’t get in anyone’s way. The only challenge is access to facilities.

“The opportunity I see is two eight-car trains running between Birmingham and Scotland each day and two 12-car trains running between Birmingham and London. Each train could run into London three or four times a day. It relieves congestion - it is environmentally friendly.

“We want any new government to create the conditions that drive growth. I think any future government will therefore want to revisit the HS2 decision and reconsider it. We can incentivise rail and make it more attractive for people currently outside our industry.

“I think express parcels is where a lot of the freight growth will come.”

This feature first appeared in RAIL. Subscribe to never miss an issue and read all our news and features.