REG - Office of Rail&Road Siemens AG Alstom Network Rail Limited - Statement re ORR railway signalling market study

Alstom SAAnnouncement

09/11/2021 07:00

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RNS Number : 7099R  Office of Rail and Road  09 November 2021

Rail regulator sets sights on boosting competition, innovation and value for
money in railway signalling

The Office of Rail and Road (ORR) has today published recommendations aimed at
opening up the railway signalling market in a package of measures that would
allow Network Rail to boost competition between suppliers on cost, quality and
innovation, and drive greater efficiency and performance across the network.

The current signalling market in Great Britain is valued at £800-900 million
per year. As Britain's railway infrastructure undergoes one of the most
significant modernisation programmes in its history as it increasingly adopts
digital technology, the market is expected to expand significantly.

For change on this scale to be delivered affordably, Network Rail as the main
buyer of signalling systems needs to transform its approach to procuring and
delivering signalling projects.

ORR has found that the current market is not competitive enough; with too few
suppliers, high costs and Network Rail not having the procurement practices in
place to benefit from its considerable buyer power. As a result, ORR has made
a number of recommendations aimed at attracting more suppliers to the market,
in order to stimulate competition and achieve better value for money when
procuring signalling equipment. These include:

·    A new approach to procurement aimed at rewarding pro-competitive
behaviour, widening the pool of suppliers, and reducing Network Rail's
dependency on incumbent suppliers.

·    Ensuring Network Rail's procurement processes are run on genuinely
competitive terms and do not unduly favour existing suppliers or penalise
'first movers' in new technology.

·    Providing suppliers with greater certainty in the volumes of work
awarded to them and reducing the risk when developing new technologies.

John Larkinson, Chief Executive, ORR said:

"There are more than 40,000 signals on the mainline network, with 65% of these
needing to be renewed within the next 15 years - and essentially there are
only two main players in the GB market for major signalling projects, namely
Siemens and Alstom, who account for over 90% of Network Rail's major
signalling spend.

"The shift from conventional to digital signalling systems has the potential
to revolutionise the way the railway operates, delivering transformative
improvements to increase capacity, lower unit costs, and reduce disruption.

"Our recommendations set out how Network Rail can reduce reliance on the
dominant suppliers, and make the market more attractive to potential new
suppliers by increasing suppliers' confidence in the market and reducing
costs."

ORR highlights continued cooperation and engagement from Network Rail,
particularly in the regions, as the key to success for these recommendations
and ORR has asked for Network Rail to submit, no later than three months from
the publication of this report, a strategy and plan setting out how it intends
to implement the findings and recommendations.

Notes to Editors

1.   Signalling market study
(https://www.orr.gov.uk/monitoring-regulation/rail/competition/market-monitoring/market-study-supply-signalling-systems-november-2020)

2.   The Digital Rail programme is a cross-industry plan to accelerate the
transition to digitally run railways in order to increase rail capacity and
improve network performance sustainably and safely.

3.   The Office of Rail and Road ("ORR") is the independent economic and
safety regulator for the railways in Great Britain, and the monitor of
performance and efficiency for national highways and trunk roads.

4.   We are also a competition authority with powers held concurrently with
the CMA to apply competition enforcement and markets powers in matters
relating to the supply of services relating to railways.

 

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