Written Statement - Creating a Global Centre of Rail Excellence in Wales

Last year the Welsh Government and CAF announced the first modern train manufacturing facility to be built in Wales. The factory is nearing completion, and trains for use by the people of Wales will soon start being built there.

Earlier this month I announced the details of the new, transformative, low carbon Wales & Borders rail service.

Keolis UK has announced it will move its headquarters from London to a new office in Wales by 2019, and will relocate its global rail division from Paris to Wales by 2020.  Meanwhile Amey has also confirmed that it is to open a new design hub in Wales where it will offer consultancy services and further jobs will be created when the companies open a shared services and customer contact center providing services to both businesses. These jobs are in addition to the 600 jobs and the 30 apprenticeships a year announced initially.

From a standing start a few years ago, Wales is now developing as a home for the UK rail industry.  But there is more we can do.  I want Wales to be recognised across the UK and Europe as a major hub for the rail industry. The Economic Action Plan signalled a new approach to creating opportunities for developing our economy. I’m now signalling the next chapter of implementation of that plan.

We have identified an opportunity in response to the clear demands of the major rail companies to establish an integrated ‘Global Centre of Rail Excellence’ in Wales. This would offer a bespoke Innovation accelerator, rolling stock and infrastructure testing, storage, decommissioning, maintenance and servicing asset to the industry and the wider supply-chain.

The strategic outline case I’ve just approved has captured the attention and the imagination of a significant number of rail industry stakeholders including the passenger and freight train manufacturers, rolling stock companies, network and service operators, trade bodies, the UK Rail Research Institute and the wider supply chain. It is also clear from what they’ve been telling us that public sector leadership is required with a strong economic and social sense of purpose to give this strategic infrastructure project the best chance of success. Wales is providing that leadership role.

So I’d like to explain what the project is. Why it’s important in its own right and as a catalyst.  How it can be a UK first. What we have done so far and what comes next.

The UK rail industry and its supply chain employs 216,000 people - similar numbers to the telecoms industry. Combined, the industry and supply chain generate in excess of £10bn of GVA every year.  Annual industry revenues are approaching £10bn. Total passenger miles grew by 120% in the 21 years between 1995/6 and2016/17. Passenger demand is expected to double again over the next 30 years.  Global trends are similar. This has led to unprecedented levels of investment in both infrastructure and rolling stock and this process is ongoing – notwithstanding the decision to cancel main line electrification between Cardiff and Swansea.

Considerable investment is also flowing into the expanding UK Rail Research Institute Network centred on Universities including Birmingham, Leeds, Huddersfield and Southampton.   I want Wales to play a more prominent role.

Transport for Wales has calculated that there are approximately 6000 workers in rail in Wales. That is a significant number but it’s clear that to approach relative proportionality we need to develop the industry’s presence here in Wales. So as we fight for a fair share of UK strategic investment it’s clear that as a Welsh Government we also have to be bold and proactive.

From a wider industry perspective there are major challenges.  The UK’s rail network has an excellent safety record.  But operating costs are high.  Our network is congested.  Innovation, modernisation, the development and integration of new technologies, implementing a vision for digital rail, moving away from diesel to new de-carbonised battery and hydrogen power sources as well as electrified rolling stock – these are all fundamental priorities both for growing and improving UK networks and services and for leveraging higher manufacturing and export outputs.

As our initial work over recent months confirms there is a serious UK problem.  I want Wales to solve it.

The main European facilities for testing and validating infrastructure and rolling stock are located in Germany and the Czech Republic. The UK has limited testing infrastructure capacity and no large, electrified test oval – and the UK based manufacturers are going as far as telling us that this is making the UK fundamentally uncompetitive as a manufacturing base. They are required to move trains across an entire continent for essential testing before bringing them back in to the UK for service adding time, inconvenience and cost to everything they do.

This is also about having the facilities in place to take innovation beyond the lab and into the stage where prototypes have to be designed, built, modified, tested, validated, accredited and brought into commercial production. This is R&D at the sharp commercial end, which relies on working in a real, dynamic environment but away from the live passenger network.  

The UK also faces a crisis in its capacity to store valuable rolling stock awaiting service introduction, refurbishment or decommissioning. Typically these are assets worth many millions of pounds and they have to be properly and securely maintained when not in service.

We have looked at several potential sites across Wales. That process is not by any means closed off. But we have identified a preferred option. This is the site of the mothballed open cast mine in Nant Helen, on the Powys/Neath Port Talbot border and the adjacent and operational coal-washery site in Onllwyn.  This area at the top of the Dulais Valley has been reliant on the coal industry for generations. That era is drawing to a close. So there is great potential here for investment that could draw on existing as well as new skills, provide a catalyst for our emerging rail industry in Wales, and offer an invaluable partnership and service offer to the UK industry and the supply chain. This is also a project that could make an important contribution to the delivery of the aims of the Valleys Taskforce providing good quality jobs and the skills to do them.

This isn’t just about testing and storage though, or the hundred plus people directly employed at the integrated test centre and the hundreds more that will be required to build it. It’s also about developing opportunities for domestic SMEs and the wider supply chain, and creating a magnetic attraction for the rail industry to choose Wales as its base.

So, in this spirit, in principle I’ve also signalled my enthusiasm for Welsh Government investment in strengthening the academic and R&D presence here in Wales. I want to further consider the establishment of a research programme and the creation of a new Chair in Rail Engineering Innovation in partnership with our Welsh Universities and other Universities across the UK.  Wales can become a more dynamic presence in shaping the future of the rail industry at home and abroad.

I’m greatly encouraged by the work done to date.  I have therefore instructed officials to move to the next stage of business case development.  This will involve continued and close partnership working.  This is not a project that can proceed without local support, private sector investment and the commitment of manufacturers, rolling stock companies, network operators and a range of other stakeholders to back it now and into the future.

We currently estimate that a bespoke facility like this will cost nearly one hundred million pounds to deliver.  Given the need we have identified across the UK and beyond for this facility, we believe that this is a project whose costs can be borne by the private sector.  In the meantime, government’s job is to establish this as an investable project, given the benefits which will flow from the establishment of such a facility in Wales.

I’m not in the business of over-promising and under-delivering. But I am stating publicly today that if we can consolidate the very considerable levels of enthusiasm communicated to us to date then the Welsh Government will commit its best endeavours to the next stages of this project. Master planning, financial and commercial planning, developing planning applications: these are all significant pieces of work and I will of course update members as to the progress of our Global Centre of Rail Excellence project as appropriate.