Railway sector resists liberalisation as freight moves on to the roads

Date: 31/10/1996

By Bruce Barnard

THE Union's liberalisation campaign has drawn a blank in one key sector - the railways. While airlines prepare for 'open skies' next April and telecommunications monopolies brace themselves for free competition in January 1998, Europe's railways are behaving much as they did 20 years ago - subsidies are rising in tandem with operating losses and shrinking market shares.

The EU is splitting into two blocks, with liberalising countries led by the UK forcing their railway companies to confront market realities, and a French-led group according the industry the special status once enjoyed by national airlines.

Failure to liberalise national rail companies across the Union simultaneously will deal a body blow to the European Commission's stalled efforts to shift freight from increasingly congested roads on to more environmentally-friendly rail tracks.

In public, governments have lent their support to the road-to-rail campaign, but some EU capitals lack the political will to challenge the politically-powerful rail lobbies.

Thus Belgium, Italy, Luxembourg, Portugal and Spain have only partially transposed a five-year-old directive on market access for rail freight.

Yet the Commission, reluctant to antagonise member states, has not even begun infraction proceedings.

There is no sense of urgency in Brussels or in the offending capitals despite a stark warning from a group of experts last summer that the industry “must change or die”.

The Commission incorporated many of the group's recommendations into its White Paper which duly won the support of member states.

But the fact that only 11 governments backed Transport Commissioner Neil Kinnock's proposal for a study of rail 'expressways' from Sweden to Italy and from the Netherlands to Eastern Europe underlines the depth of opposition to any challenge to the status quo.

The reports will be nodded through at the next meeting of transport ministers in December and are then likely to gather dust.

Events in the market-place tell the real story, with rail continuing to lose out to road, accelerating a trend that has seen its share of European freight traffic drop from 32&percent; in 1970 to below 15&percent;, while lorry transport's quota has risen from 48&percent; to 72&percent;.

Rail's chronic inability to compete is evident in Germany, which in railway politics is halfway between the ultra-liberal UK and staunchly protectionist France.

Deregulation of government-approved freight tariffs in 1994 led to a slump in rival truck and barge rates to which the German railways, still digesting the merger of the eastern and western networks, were incapable of responding.

The German government, under constant pressure from a powerful 'green' constituency, and the Deutsche Bahn itself, is determined to wrest market share from the road.

But industry watchers warn that the outlook is grim. Only small volumes of freight will be transferred from road to rail in Germany because of the poor performance of the railways, according to a recent report from Swiss consultants Prognos which highlighted the traditional litany of complaints from shippers: rail's lack of flexibility, its inability to handle small consignments and the lack of customer contact.

The UK experience demonstrates that there is not a straight trade-off between liberalisation and increased market share. Half the country's passenger operations have been privatised and almost all its freight services are, or are about to be, in private hands.

The transfer from public to private ownership has not yet resulted in any sharp increase in traffic, although the government argues it is too early to judge.

The pro-rail lobby suffered a serious set-back, however, when environmental protests killed off a 2.5-billion-ecu plan for a 180-mile freight railway from the UK's industrial heartland near Birmingham to the Channel Tunnel.

Moreover, negotiations to give freight companies cheaper and quicker access to the UK's rail track collapsed in September.

Some plucky governments are, however, throwing their rail companies to the lions. NS Cargo in the Netherlands has been weaned off subsidies and SF, the Swedish railway, has lost its monopoly.

But until France does the same with SNCF, Europe will not have a vibrant rail freight industry to match that of the United States.