We need to focus on this wider context and our role in the UK economy. Our sector is of sufficient scale that it can make a real impact on the UK’s economic performance. The RSG strategy is our method for doing that, and to set out the path for delivering the growth, jobs and productivity that the Government seeks from us.
The importance of productivity growth cannot be understated. The UK is trailing other G7 economies in labour productivity by 18%. Manufacturing is an area of the economy where this trend can be reversed - through careful investment in innovation and developing our high-skilled workforce, rail can play an important part in unlocking the productive potential of the UK economy.
But a high-performing rail supply chain will also provide productivity benefits beyond the rail sector. We know that rail enhances the productive potential of the economy by up to £11.3bn per year, and that up to £1.7bn of benefits are derived from sharing knowledge and technology in the clusters that rail links facilitate.
The RSG therefore starts by issuing a bold commitment to industry and the UK - a productivity pledge to deliver:
- A strategic approach to procurement and planning.
- A clear plan to drive world-class UK technologies.
- A coherent skills plan to attract the best talent and increase productivity.
- A comprehensive package of support for SMEs.
- A fresh, co-ordinated approach to increase exports and inward investment.
To get there, the RSG has focused on four strategic pillars to drive growth. Through concerted action in each of these areas, the supply chain can prepare itself for sustainable success at home and abroad:
- Creating market conditions for growth.
- Accelerating the uptake of innovation.
- Investing in people and skills.
- Growing exports and inward investment.
In each of these areas the RSG’s strategy sets out achievable proposals to support the supply chain.
Market conditions for growth
The first requirement for growth is a confident supplier base to encourage investment. After listening to industry, the RSG established that one of the most pressing problems for UK rail suppliers is the volatility of demand in the sector, making it difficult for businesses to develop long-term UK strategies and presenting obstacles to SMEs looking to develop further. While every market experiences fluctuating demand, the experience in the rail supply sector can be extreme - in 2011, the industry estimated that discontinuity in production added 20% to the cost of rolling stock.
To establish the conditions that rail businesses need to grow, the RSG will work closely with government to produce greater visibility of planned investments. This new mechanism will support suppliers to prepare effectively for peaks and troughs in demand, letting them make sound investment decisions on people, innovation and equipment.
We know as well that in rail supply (as in many areas of manufacturing), access to finance is a significant problem for development, particularly for small companies looking to expand. This is severely felt in industries with complex structures and rapid innovation, where financiers can struggle to appreciate investment opportunities when they arise. The RSG is therefore seeking to develop a finance forum for rail suppliers - this will build on the success of forums in the aerospace and automotive sectors to improve banks’ understanding of the industry and its potential.
Suitable conditions within the supply chain are just as important as these external pressures. The RSG has looked to other sectors where supplier excellence schemes have provided effective benchmarking to spur performance of all players in the industry, and developed a plan to promote best practice and continuous improvement. The RSG will also look to current experience in the sector to agree a whole-industry code of practice for collaboration.
By taking action to foster collaborative working in the supply chain, and by seizing opportunities to work closely with government as it develops its plans for rail (not least with the National Infrastructure Commission and the Small Business Commissioner), the RSG will give the supply chain an effective voice in shaping the future of the railway for its passengers and suppliers.
Innovation
Businesses operating in this new environment can have the confidence to invest in research and development, and the RSG will take a strong leadership position within the industry to ensure that investment in innovation is available to the supply chain.
In areas of technology and innovation British rail suppliers have key strengths that are unmatched in the world market. The RSG has identified five key areas of technology where UK businesses already have a leading position, or where they have the potential to become world class in the next ten to 15 years.
- Energy management.
- Customer experience.
- Advanced control.
- Whole-life asset optimisation and through-life management.
- High-value rolling stock systems.
From developments in flywheel applications and energy systems analysis, to the innovative design of new mobile payment, data management systems and cyber security advances on the network, British suppliers have broken new ground in offering creative solutions to rail challenges. Meanwhile, advances in asset management systems have resulted in UK business leading the way in the use of Building Information Modelling and remote condition monitoring, which will transform the design of tomorrow’s global railway.
The RSG’s plans to prioritise innovation in these areas will begin with the development of a network of rail centres of excellence. Bringing together the best of the UK’s rail universities with businesses in the sector, the new centres will pass the benefits of collaboration in applied research to the whole supply chain. For example, Aerospace innovation facilities have already led to significant collaboration on projects between tier 1 manufacturers.
This opportunity for shared research across early and late Technology Readiness Levels will be a boon to innovation in UK rail. Such centres can support a faster development cycle, allowing products and services to enter the market more quickly. A quick route to market is essential for all actors in the supply chain, but particularly for small businesses, for whom access to capital and restricted cashflow can intensify the need for first mover status.
But innovation is not limited to technology and research. Innovation in business structures and franchising will be crucial in preparing the supply chain for the future. By co-ordinating a programme of activity with the RDG, the RSG will ensure that the people who build the railway have a strong voice in shaping it for the future, including encouraging innovation in franchising arrangements, such as the Residual Value Mechanism piloted by the DfT.
The strategy also commits the RSG to leading the development of a code of practice for embedding innovation in the railway, as well as a framework for collaboration. Just as important is a commitment to champion work to streamline product approval processes, to reduce time and costs while maintaining safety standards and transparency.
People and skills
New innovation requires a highly skilled workforce to develop and implement these emergent solutions, and the RSG’s strategy provides for the increase in recruitment that the industry needs.
Many of the challenges facing UK rail manufacturers are felt across engineering, manufacturing and construction sectors. A lack of diversity in an ageing workforce is exacerbating the problems of a widening skills gap - it is clear that much more must be done to attract new talent.
