THIS year First GBRf celebrates its 10th anniversary, and since signing
its first contract in April 2000, it has grown rapidly to become
Britain's third-largest railfreight operator with an annual turnover of
around £50 million. Mr John Smith (pictured), who has been managing director of
GBRf through a decade of growth, is optimistic the company can remain
successful through its first recession.
"We see different scenarios
developing over different areas of our business. Coal remains strong
but intermodal is struggling. Network Rail has announced a reduction in
track renewals, and its new contract with us requires fewer
infrastructure trains. The market for construction materials has also
drifted, and road hauliers are pricing below cost to keep their
businesses afloat. All this means there are challenges ahead."
GBRf will attempt to save £1.5 million this year, but Smith is keen to
stress that efficiencies must not be made at the expense of future
growth. "We are well aware of where the risks lie and I think we're in
a good position to manage them. It's important to take action to manage
costs at a time like this, and contingency plans are very important for
dealing with a downturn in traffic," he says. "Many of the assets used
by railfreight operators - locomotives, wagons, and skilled people -
are very hard to come by, and once you've shed those assets it's very
difficult to get them back."
Despite the downturn, GBRf has been
successful in securing a number of major new contracts this year. These
include a five-year deal with MSC shipping company for moving
containers from the port of Felixstowe to central and northern England,
a five-year contract with Network Rail for infrastructure trains, and a
three-year contract with Bombardier to deliver new passenger trains.
 Smith expects mail volumes to increase this year and GBRf has also been
granted a license to run passenger trains, although this will initially
only involve the provision of locomotives and crews. GBRf is looking at
expanding into new markets in Britain and is even considering the
possibility of bidding for contracts in mainland Europe, a move which
has already proved successful for its two main competitors DB Schenker
(formerly EWS) and Freightliner.
GBRf is a relative newcomer to the
highly-competitive coal market having operated its first train for EDF
Energy in 2007, but it has grown rapidly to capture a 12% slice of the
market, and witnessed a 111% increase in turnover in the 2008-09
financial year. An additional 89 coal wagons are currently being
delivered through leasing company VTG to help increase capacity in this
Railfreight has been a major beneficiary of changes in
Britain's energy market over the last decade as coal flows to power
stations have switched from local collieries to long-distance movements
between ports and power stations. This change has been a major driver
of the 50% increase in railfreight volumes in Britain over the last
decade. But with the need to reduce carbon emissions looming ever
larger on the political agenda, coal-fired power stations are likely to
play a smaller role in meeting the country's future energy needs. So
how will this impact an industry now heavily reliant on the movement of
"The jury is still out on the best way to generate electricity,
and coal will still play a major role for at least 10 years, but it
could have a considerable impact on railfreight," says Smith.
Nonetheless, GBRf could be about to benefit from one of the
alternatives to coal, and is poised to sign a five-year deal for the
movement of biomass to power stations. GBRf also transports gypsum for
use in the desulphurisation process at two power stations.
believes there is too much pessimism in the railfreight industry, and
anticipates a return to the upward trend in volumes witnessed in recent
years. "The only healthy position is for us to keep growing, and the
only question is how fast we can drive that growth. This will be
determined by some big contracts that will be coming up in the next few
years, and whether customers want to continue using a single operator.
A £100 million turnover is achievable and that's where we want to go.
The downturn has really shown the positive approach of our staff and
with that attitude the business takes on a momentum of its own."