Investing today for tomorrow's success

In this episode, we're joined once again by Johnny Schute, RSSB's Chief Operating Officer.

Together, we'll explore what rail needs to be thinking about in terms of driving cost reduction, some of the complexities around investing today for benefits tomorrow, and how we at RSSB are committed to supporting industry in this challenge. 

Find out more at: https://www.rssb.co.uk/our-business-plan

Transcript

Host [00.13]: For the rail industry, the pressure to reduce costs while maintaining safety and efficiency is immense. The costs associated with maintaining the network's infrastructure, compounded by aging systems, strain budgets. In addition, adopting new technology, which we talked about with Vaibhav Puri last month, while promising efficiency does require significant investment. And that's not even to mention the current state of data fragmentation in the industry, which can mean that key insights aren't adopted quickly or broadly enough, which in itself can have costly implications. 

So, with us today is Johnny Schute, our Chief Operating Officer. In this episode, we'll explore what rail needs to be thinking about in terms of cost reduction, some of the complexities around investing today for benefits tomorrow, and how we at RSSB are committed to supporting industry in this challenge. 

Hi, Johnny, and thank you so much for joining us today. 

Johnny [01.09]: Great to be with you again, Jasmin.

Host [01.11]: So, to set the scene, I think I'd like to kick the conversation off by thinking about some of the financial pressures that rail organisations are facing at the moment. Now, I'm sure many of our listeners are acutely aware of these already, but could you summarise them briefly?

Johnny [01.26]: I think the first one really is the reduction in patronage post-COVID, and that at the moment still only sits at 80%. And in light of that, we've got quite significant changes in working patterns, and that has also then led to less reliance on the rail network. And also, rail does remain quite an expensive mode of transport for a lot of people. So that also creates some barriers. Wages and operating costs are also increasing in many spheres beyond the rail sector. And also, we do have a problem still with performance. So until such time as that performance starts improving, the charges that derive from poor performance or from delay also stack up. So, those are the sort of things that we're having to counter at the moment. 

Host [02.20]: Thanks, Johnny. And thinking about this challenge at the highest level, what do you think needs to happen across industry to enable meaningful cost reductions? Or in other words, what do you think rail can be doing more or less of? 

Johnny [02.32]: I think the first thing they can do, Jasmin, is that they can reduce operating costs through efficiencies. And those sort of efficiencies will come from things like automation, things like AI. So, I think that's certainly something that we can capitalise on. We do also need not only to reduce costs, but we need to increase revenue growth. We need to get more and more people using the rail network, not only paying passengers, but also freight, to try and make up for some of the deficiencies that we've got. I think that better technology is going to be really important. And so, getting more innovation into the rail sector, such that we're getting a bigger bang for our buck, I think will also be fundamental. So improving those performances key, as I've mentioned, and having fewer penalties and less holdups will certainly play in our favour. 

I think also a very key area and one I'm particularly focused on is reducing duplication. There is still a lot of duplication across the rail sector, and by trying to excise some of that duplication, I think that we will also reduce the costs that we bear. 

And then finally, I think one key area is also developing our staff capability because if people are developed and their competencies are increased and are really worked on, I think that in itself will also bring some quite significant cost reductions over time. 

Host [04.03]: Some really great insights there, so thank you, Johnny. And of course, there are some complexities when it comes to investing in something now in order to reduce costs in the longer term. So, I'm wondering if you could explain some of these complexities for us? What might they look like? 

Johnny [04.18]: One of the endemic problems that we run into as short-termism in the rail sector. It's that people are always asking the question, "Yes, but when is this actually going to pay back?" And a lot of people, I think, have got slightly befixed by the control periods. It does create if you like a sort of period, a fixed period in people's minds, and is it going to be done in the control period? Are we going to make the savings in the control period? And I think that is an area that people are going to need to get over, because quite often you have to spend now in order to be able to realise some of the benefits further down the track. 

I think the next area is being able to access the capital in order to be able to make these investments. Now, as we move to a rail sector that is much less dependent on the private sector and is now going into the nationalised arena, trying to get hold of that capital is going to be tricky because there are, of course, many other parts of the UK economy that are looking for investment. So we will have to take our place in the queue with many other of the utilities out there, whether it's water, whether it's electricity, gas, and so on and so forth. So, that I think will also bring in some complexity. 

We also need to make sure that all parts of the system are investing. It cannot just be that there is investment in infrastructure or there is investment just in rolling stock. There is a lot more. All parts of the rail sector will require proper investment if we're going to be able to go forward as a system because we are in the rail sector a system. 

Host [05.56]: And on the flip side then, what would you say about the long -term benefits of investing in efficiencies now? 

Johnny [06.01]: I think the key thing is if you're investing now, you're fixing the roof for later, to use an old cliche. And so therefore, getting that money in now means that we are going to be in a much more resilient condition as a rail sector later on and that particularly around things like climate change and climate resilience and adaptation to climate change, so we do need to actually start putting the money in now in order to be able to actually make sure that we can function as efficiently as we should do in coming years. 

And of course investing now is cheaper than investing later, because one thing you can be sure of is that the cost of money or the cost of investment will be cheaper now than further down the track. And that's just part and parcel of the inflationary process that exists in any economic model. And of course, having the right infrastructure now, paying for it now, means that the revenue that we are looking for, that revenue growth that we're looking for, will be available to us now rather than later. So, the sooner we can get things fixed and get in the right configuration, the sooner we can start realising some of that revenue growth that is the other side of the coin of cost reduction. 

Host [07.12]: Yeah, and you know, I think it's absolutely vital for our listeners to be aware of that. So, thank you. And to follow on from that then, what do you think are some areas that rail companies can look into now to ensure a positive outcome down the line? 

Johnny [07.25]: The first area is really those efficiencies around maintenance. I think we have to recognise that certainly in the infrastructure arena, particularly, that the enhancements that people were looking for will not be available because as I said earlier on in this conversation, we are in competition with other utilities. We also have to recognise that renewals will not necessarily be the go-to. So therefore, it's maintenance that really is going to be important, making sure that we’re delivering maintenance in the most efficient way. 

I think the next area is having the right rolling stock. I think that a lot of people, and I include myself amongst them, are crying out for a comprehensive rolling stock strategy, because obviously as you buy rolling stock, we're going have these assets for 30, 40 years. So, we do need to make sure that we've actually got the right rolling stock for the rail sector over that period. 

As mentioned already in this conversation, we have to proof the network a lot more against climate change and making sure that we are much more resilient and robust in these changing climatic conditions. 

And then also really improving the competence and capability of our staff. So, we're not only making sure that we are recruiting the right people at the start of their careers, but also developing them through their careers such that they become more capable and therefore more efficient. But we also retain them because, of course, having a constant churn of people going through an industry is expensive. 

Host [08.58]: Thanks, Johnny. And I'd say this is where RSSB can come in. In last year's Annual Business Plan, we based our commitments around six industry challenges, cost reduction being one of those, of course, for the very first time. Now, that financial year has come and gone. So what I'm wondering is, how did we do against our cost reduction commitments? I'd like to talk, I think, about the new A boards that we introduced. So, what did we do and how will that effort help industry? 

Johnny [09.25]: Thanks for raising that, Jasmin. So we introduced new A boards, as you say, that help us to accelerate sooner out of certain types of speed restrictions. And those were based on trials conducted by Network Rail over various routes. And what we found was that these A boards proved that allowing drivers to accelerate when the front of their trains reached the commencement of a higher permissible speed, this saved time that otherwise would have been spent at a lower speed. Because of course, you will recall that before these A boards, all drivers had to wait until their entire train had cleared the end of the restriction before they could accelerate. But once the train has cleared this high-risk point without incident, keeping it running at a lower speed is absolutely needless. 

So, the project team at RSSB speed drafted revisions to the relevant CCS standards, and they then updated the Rule Book, and the relevant modules are now updated, and that gives more instruction about the new signage. And the delay data used to quantify the benefits of this project show that the trains were losing around 4 million minutes at a cost of about 2.34 million pounds between 2021 and 2022. And the national benefit of the A boards over 5 years is projected to be anything up to 41 million pounds. So, that is a very significant sum of money. And we're very excited about what we've achieved in that space. 

Host [10.45]: That is significant indeed. Thank you, Johnny. And of course, we've just recently published our Annual Business Plan for 2025 to 2026. So, can you now outline what we'll do for industry in this space this coming year? I know we're looking at improving data interoperability, for example. So can you tell us a little bit about that? 

Johnny [11.03]: Data interoperability, we are doing this principally through our insights platform. So we're drawing a lot of data in automatically through APIs that we're building with our partners, and then applying the artificial intelligence we've got within RSSB to come up with the analysis that we need. Key to that is making sure that we have, we're dealing with our partners have right data architecture such that we can load it quickly into our data warehouse, but a really exciting area. And as that data now flows seamlessly into our data warehouse space, we are being able to throw out these insights much more quickly and being able to get them out to our members, our stakeholders, such that they can use them as quickly as possible. 

Host [11.48]: And also, what about our work in improving risk and safety intelligence? 

Johnny [11.53]: The one I want to focus on, Jasmin, is around the update and the relaunch we've done to our Cost-Benefit Analysis guidance and tool. And that's helping our members make safety investment decisions that really provide value for money and deliver a safe railway. 

Now, what we're doing is we're replacing our existing guidance and tool, which is about a decade old. And although it's technically sound, they are showing their age, and that of course limits their use. So anyway, the new guidance we're putting out, it's being updated, it's reflecting current good practice and includes a lot more information on things like when to undertake quantified cost-benefit analysis, when not to, information that you would need to include within a safety-related cost-benefit analysis, and also then finally how to interpret the results of cost-benefit analysis, including what it means to ensure that safety is being delivered so far as is reasonably practical, which of course is the central tenet of any safety judgement. 

The tool itself is going to be a lot more accessible. It's going to be a lot more user-friendly. We're developing a new web-based application to replace the current Excel tool. All of this will be updated to make sure it's fully aligned with the guidance that I've spoken about. 

Host [13.08]: Thank you. That's all really promising. Now, let's look at rail as a whole over the past couple of years. Do you think there have been any highlights in industry's cost reduction efforts that we should be particularly proud of? 

Johnny [13.20]: I mean, the first thing is, you know, we must shout out Network Rail, who, although they've been working in, like all of us, in a very, very difficult environment, particularly around some of their industrial relations issues that have been in existence, around the pandemic, they have still between 2019 and 2024 realised 4 billion pounds worth of savings, which is a fantastic achievement. You know, they're working much more efficiently. They're improving their procurement processes. They're managing their possessions more efficiently. All of these are aggregating to really make some significant difference. 

But it's not all just about cost reduction. It is very much about increasing revenue growth through bringing passengers back onto the network and getting people back into rail and getting people back using freight as much as they can. And of course, we mustn't forget the great success of the Elizabeth line, which has made a significant contribution to increasing that revenue growth. So, a great shout-out to those people who brought the Elizabeth line into play and are now using it. So, I think those are the ones I'd probably focus on. 

Host [14.30]: Wow, definitely lots to be proud of there. Thank you. And finally then, what advice would you share with our listeners in the rail industry to help reduce costs? 

Johnny [14.38]: So, the top of the agenda has to be stop duplication. We must excise duplication from across the rail system. I hope as we move toward rail transformation and working under the aegis of Great British Railways, that will happen. But we are a system, and therefore in any system there is always the danger of duplication, and we need to get rid of that wherever we find it. 

We need to encourage innovation. The railways do not have a God-given right to exist. They need to innovate. They need to keep fresh. They need to keep competitive against other modes of transport and other ways of delivering what the rail sector delivers. So, I think that's really important. I think that we need to become much more efficient and much more savvy about how it is we bring efficiencies in. 

And the final thing that I would say is we really have to keep focused on the customer because we're not here just to produce a rail network. We are here to satisfy a customer demand, whether it is the travelling public or whether it is the freight sector, we're here to meet a need. So, by focusing on that, that I think will bring us to the right place. 

Host [15.47]: Some great advice to end on. Thank you very much.

Johnny, thanks you so much for joining us today.

Johnny [15.53]: I really enjoyed talking to you, Jasmin. 

Host [15.56]: And thank you for listening. If you want to learn more about how RSSB is supporting industry in reducing costs, please visit our website. 

We look forward to you joining us for the next episode, and in the meantime, safe travels!