Examination of Witnesses (Questions 160-179)
MR GRAHAM SMITH AND MR ALLEN MARSDEN
WEDNESDAY 24 APRIL 2002
160. Returning to the Channel tunnel for the moment, you said that your company had lost about £9 million over recent weeks and months.
(Mr Smith) Yes.
161. How much longer can you sustain those losses?
(Mr Smith) Not for ever.
162. Not for ever, for ever being weeks, months, years?
(Mr Smith) It is a question which I have faced before and my response now is the same as then, which is it could be weeks, it could be months. I hope it is never, because we have invested a lot of money. No, we cannot go on for ever.
163. I heard you say that you are in the business long term and I accept that, but there comes a point when even your company, with its determination, commitment and all the rest of it, has to look to take some action. You cannot continue to haemorrhage revenue like that. When the time comes, be it weeks or months, what action would you think you may have to take?
(Mr Smith) This is speculation but presumably we shall have to go to the Strategic Rail Authority, given the terms of our original acquisition of the international rail freight business, advise them that we can no longer continue in that business and through the terms of that agreement discuss with them how we exit from that business.
164. SNCF gets most of its resources from the French Government, as we have established. You said you had sympathy with SNCF. From your professional point of view would you accept the possibility that given that SNCF are making losses as a result of this but that their resources are coming from Government, then Government by definition will be addressing that loss of revenue which SNCF are experiencing.
(Mr Smith) That is a fair assumption to make.
165. Do you know it is happening?
(Mr Smith) No, I do not know. I am not privy to how SNCF's funding works.
166. Would there not then be a case, unless we are to wait until such time as your company does withdraw from the business, which would be quite serious, for government either on the one hand resolving this problem, or on the other hand sitting down either directly or through the SRA to discuss how your revenue losses are going to be addressed?
(Mr Smith) It is not just EWS, it is our end customers, it is also our suppliers and other people involved in the industry, the wagon suppliers, the terminal operators. Together we have lodged with government the fact that we are losing money and inviting them to suggest how this issue might be addressed. This was done through the Rail Freight Group. I do not believe there has been a response. We have also lodged the issue with the European Commission. We have to start somewhere. We have made a complaint to the European Commission who have been pursuing it on their own account anyway. We petitioned the European Parliament. It has been deemed to be an urgent matter and will be dealt with in the next month.
167. I know you are in a sort of co-ordinated approach in terms of UK and European rail freight, but does SNCF want your business?
(Mr Smith) SNCF states that it wants our business.
168. You did say earlier on that you had rail links with 80 per cent of UK ports.
(Mr Smith) Yes.
169. What do you describe as a port?
(Mr Smith) I describe a port as a place, probably recognised by statute, which will either import or export goods via sea.
170. Not Brighton.
(Mr Smith) It did not come immediately to mind.
171. I am told that there are over 300 ports, but a number of them would not be recognised by me as a port. When you say 80 per cent, is that in terms of numbers or in terms of tonnage?
(Mr Marsden) It is more in terms of volume.
172. How many ports actually have rail links to them? If we are importing and exporting 500 million tonnes, or whatever, in a year and 400 million of that are going through two ports, your claim to have rail links to 80 per cent of ports to a simple lay person like myself could give a whole disfigured picture, could it not? How many ports are you actually serving?
(Mr Smith) I do not have that information. We will provide that.
173. You have an efficient, top of the shop company and you do not know how many ports you operate to. That seems rather strange to me. As a lay person, if I were running a business, I would wonder how many ports we were serving. Would that not be reasonable? Could you let us have that?
(Mr Smith) Yes; certainly.
174. It is very important. May I ask a final question about the West Coast and East Coast Mainlines? I am interested not only in the point you made about developing; we run competitions, at least some governments run competitions. Is there a danger in your view unless the West Coast Mainline and East Coast Mainline are modernised that the pressure to improve passenger services could have an adverse effect on the slots you have for freight?
(Mr Smith) If the West Coast and East Coast Mainlines were not modernised, it would be extremely difficult to achieve the growth targets the Government have set for rail freight.
175. What do you have on the West Coast? Is it 27 paths?
(Mr Smith) In each direction we use 42 paths per day and there are approximately 15 unused paths that we could grow into if nothing else happened.
176. So you are okay for the time being.
(Mr Smith) We are okay for the time being, but some of those paths get taken away by passenger growth and by Railtrack's need to occupy the network more to maintain it.
177. Are you worried about that?
(Mr Smith) Yes.
178. Could they be taken away? You do not have grandfather rights like the airlines have or anything like that. Somebody can come along, SRA or whoever and say
(Mr Smith) We have access rights to the network through our track access contract which expires at the end of May. We are currently seeking a new ten-year agreement which Railtrack's administrators have stated they are objecting to because it would interfere with the purposes of the administration. At the moment we are expecting a court hearing in the High Court to discuss the matter.
179. When your agreement comes up for renewal, which is at the end of May, do you have any indication from the Regulator, or SRA, whoever does this, that at least you will not lose any paths or is that still confidential?
(Mr Smith) It is not confidential. Our access agreement asks for exactly the same number of rights as we have at the moment.