Rail Sector Deal – a collaborative approach to enhancing UK rail Panellists:

1. WIG Infrastructure Series Rail Sector Deal – a collaborative approach to enhancing UK rail Panellists: Mike Noakes, Head of Rail, BEIS Darren James, Managing Director, Infrastructure, Costain Shaun Jones, Vice President, Transport, Thales Group Rob Morris, Managing Director, Siemens Rail Automation James Bain, Global Director, Transport, Worldline Neil Robertson, Chief Executive, National Skills Academy for Rail Anna Ince, Chief Executive, Resonate Thursday 6 June 2019For other WIG events & opportunities visit www.wig.co.uk Join the conversation @WIGuk| #WIGevents

2. Industrial Strategy Rail Sector Deal Mike Noakes

3. UK’s Industrial StrategyStrengthening the foundations of the UK economy

4. The UK’s four Grand Challenges Growing the AI & Data-driven Economy We will put the UK at the forefront of the artificial intelligence (AI) and data revolution Clean growth We will maximise the advantages for UK industry from the global shift to clean growth Ageing society We will harness the power of innovation to help meet the needs of an ageing society The Future of Mobility We will become a world leader in the way people, goods and services move

6. Sustainable Railway Darren James

7. WHY A SUSTAINABILITY PILLAR? • We need to replace the traditional ‘boom and bust’ profile of work coming to market with smooth and visible pipelines of work – for, e.g., the following: • We need smoother pipelines because they:- • are key to more efficient delivery and productivity (with them we reckon we can take out between 10-30% of costs) and incentivises supply chain investment. • enable much better business planning • support both the introduction and longer term survival and growth of rail supply businesses • sustain the skills base of the rail supply industry and help us increase capability and capacity to deliver major projects and CP6 and beyond – with signalling becoming increasingly digital • And this is what the renewals profile looks like:-

8. WHAT BOOM AND BUST LOOKS LIKE FOR RENEWALS

9. PIPELINE VISIBILITY FOR ENHANCEMENTS • We also need a visible, long term pipeline of enhancements (major projects) to enable supply chain to forward plan and invest • At present we don’t have that visibility because the DfT Rail Network Enhancements Programme (RNEP) is more of a process than a programme, giving little certainty as to whether and when schemes will come to market • There is therefore a risk of hiatus in enhancements work and loss of skills capability since enhancements are larger multi-disciplinary projects requiring different, more specialist system integration and project management skillsets compared to those needed for renewals • And if they are not being used these expensive skillsets are likely to be diverted to other sectors or overseas - as and when work regains momentum, may be difficult and/or expensive to recover those resources, adding to the industry cost base • Rail Minister Andrew Jones said at Railtex, on 15 May that DfT will be producing further details on its enhancements pipeline and we look forward to receiving this as soon as possible • And as for rolling stock, the order profile for new vehicles is even starker

10. Contains private information

11. LOOKING AT ALL MAJOR CLIENTS Layering over of each major client's pipelines to obtain a comprehensive and transparent view of work coming to market = ENABLES FORWARD PLANNING AND INVESTMENT BY SUPPLY CHAIN = EFFICIENCY AND PRODUCTIVITY GAINS

12. SO THINGS NEED TO CHANGE GOING FORWARD

13. SUSTAINABILITY PILLAR – DELIVERY PLAN • We are developing a delivery plan to achieve these changes • There is an outline programme for 2019, with a number of suggested workstreams, and a monitoring dashboard to measure progress • A meeting is currently being scheduled for the delivery team to confirm workstreams and appoint leaders • As part of that we will be continuing the Rail Supply Group’s work to develop a balanced scorecard for rail procurement to be used across the industry • SME development and integration will be a core element of this work

16. Digital Railway Rob Morris and Shaun Jones

17. Transformation through Digitalisation - Rising to the Challenge An Olympic Effort – Achievable when we all pull together! UK PLC Delivers Before 2007 2012 • All prior Olympic builds had multiple fatalities • Budgets perpetually exceeded • Venues not finished on time • Sustainability not considered, no legacy • Zero export capability • Skills lost • Zero fatalities • Within cost expectations • Venues delivered one year early • Sustainable with long lasting legacy • UK PLC – an exportable brand • Created new skills (on and off the track!) • Inspired a nation with our best performance

18. Transformation through Digitalisation - Rising to the Challenge The Challenge – Demonstrate unit costs 30% lower than current conventional infrastructure by 2025 and replace all life expired conventional with Digital over the following 18 years. 2025 The Strategy – Convert visibility of renewal roadmap to a deliverable DR plan to facilitate the opportunity for cost reduction. 2019 How – Aligning train cab fitment with a smooth infrastructure renewals profile and the right commercial model

19. Transformation through Digitalisation - Rising to the Challenge • Next Steps: • Focusing on priorities • Identifying resource support • Verifying and building on the great work done so far • Championing the ‘How’ with Government and Industry collaboration Deliver cost reduction Smooth Plan

20. Transformation through Digitalisation – The new Challenge What post 2025 will look like! “Passenger satisfaction at highest level for 20 years” “Over 50% of all UK freight now carried by rail” “Digital Technology at the Centre of the Rail Sector Deal Success” “Artificial intelligence behind the world’s most reliable railway” “Open data benefits the UK economy by up to £1 billion a year” “London to Edinburgh proven to be the most reliable railway in the world”

21. Data James Bain

22. “Give me a Rock and a Lever and I can accomplish anything.” Dilly Knox

23. Convergence

25. JRDAP and Rail Sector Deal Alignment

26. Operating Model

27. Skills and Productivity Neil Robertson

29. In a nutshell – the problems and the way forward Data shows skill shortages, leading to wage inflation Unprecedented investment Technology changes Brexit – loss of semi skilled labour Productivity not great, perception problems Wider economic impact - treasury Apprenticeship levy, service and forecasts What’s the way forward? More new recruits – attracting diverse groups More leaders and managers trained New ways of working to improve productivity Digital upskilling and new skilling. Data datadata A strategic workforce plan to manage all this

31. INVESTING IN OUR PEOPLE & SKILLS

32. There is evidence of significant wage inflation in rail construction; a significant contrast with construction as a whole. This would be unlikely to occur if sufficient, trained resource was available. • Notes: • In the construction sector overall the cost per worker only went up by 5% between 2008 and 2014. • In rail construction the average employee cost rose by 85% over this same timeframe. • This could be due to a lack of skills planning (so demand exceeding supply and driving up wages) or due to outsourcing the lowest cost roles (thereby shifting up the average). • If it were due to outsourcing lower cost roles we would expect the margin to increase, as no organization would outsource low cost roles so that they cost more. • All things being equal, if the employee cost had stayed flat, the productivity uplift (ie the efficiency component) would only have been 15% in Rail.

33. Construction unlike Transport & Storage has failed to return to trend productivity suggesting over capacity Construction Transport & Storage

34. The study suggests that there are opportunities to avoid significant (10-30%) over-run capital costs and deliver (10-40%) efficiencies. We are targeting 30%. £300 Billion of Infrastructure Spend Efficiencies Missed Excess Costs 50%-60% Optimally Spent A: Avoid the cost of conflict and the cost of poor capability and create an environment for efficiency 6 B: Avoid the costs of skills shortages 9 C: Stop restarting the learning curve on people, processes, products, contracts and technology 4 D: Take the right risks and stop paying for excessive design redundancy and unrealistic risk transfer 4 E: Use “digital / don’t build” to get the outcome without concrete 3 F: Use our scale for robust asset data, manufacturing, R&D and asset standards 4

35. Midlands Pilots Anna Ince

36. Overview • n

37. Who is involved? Steering Group Delivery Group & Partners

38. Progress Update

39. Update – Midland’s Pilots: Delivery Plan • n

40. Upcoming Events Tuesday 25 June Introduction to the Outsourcing Playbook Thursday 27 June Natural Capital and Industry in 2019 With speakers from Natural England, Defra, Cranfield University, Anglian Water, Peel Land, and Green Alliance. Thursday 11 July Infrastructure Finance Review with Matthew Vickerstaff, Interim Chief Executive, Infrastructure & Projects Authority WIG Leadership Programmes We are now accepting applications across all of our programmes for upcoming cohorts