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Demand for rail services in the Highlands has grown significantly in recent years according to a major new report published by Highlands and Islands Enterprise (HIE).

The study challenges perceptions that the Highland rail network is lightly used, dominated by tourist traffic and represents poor value for the public funding it receives.  It details how rail contributes significantly to the Highlands and Islands' economy, supporting more than 1,500 full-time equivalent (FTE) jobs and underpins the viability of many businesses in the region. 

It also describes how the network helps to retain population in more remote areas and provides important onward links to island communities. The report also considers the importance of rail freight and the rail network's environmental benefits. 

HIE will use the findings to continue to make the case for further investment in the region's rail network and service improvements in the new ScotRail franchise, which will be awarded later this year. 

HIE's transport policy manager Tom Matthew said the research underlined the contribution that rail services already make to the region's well-being as well as the potential benefits of further improvements. 

He said: "There is a perception in some quarters of a railway network in terminal decline and both at UK and Scottish levels there is pressure to focus investment on urban rail services.  The merits of retaining rail services in less populated areas have been questioned.  The image projected is of a lightly-used rail network, used mainly by tourists and providing poor value for the public sector money it receives. 

"The report we have commissioned shows this not to be the case.  It demonstrates strong passenger growth, a significant economic contribution, social inclusion benefits and relieving pressure on the road network. 

"The findings support the strong role that HIE has adopted in support of the rail network.  We are the main funder of the rail development group The Highland Rail Partnership, while we are also supporting the Invernet project with £200,000 funding.

"HIE will continue to work with our partners and the rail industry to achieve improvements such as reduced journey times, more frequent and regular services between Aberdeen and Inverness, further rail commuting opportunities and continued growth in rail freight." 

The research revealed a significant growth in passenger traffic on Highland lines between the start of the current ScotRail franchise in 1997/98 and 2002/03.  The greatest rise (50 per cent) was on the Far North Line between Inverness and Thurso/Wick.  This was mainly due to the introduction of a commuter service between Tain and Inverness and the reopening of Beauly Station.  The growth on other services was: 

·        Kyle Line (Inverness-Kyle of Lochalsh) 40 per cent

·        Highland Main Line (Inverness-Glasgow/Edinburgh) 35 per cent

·        West Highland Line (Glasgow-Oban/Fort William/Mallaig) 20 per cent 

Traffic on the Inverness-Aberdeen line as a whole grew by only 13 per cent, which, HIE believes, highlights the need for significant investment and service improvements if it is to realise its full potential.  However, the line remains the busiest in the HIE area.  Inverness is the busiest station with over 700,000 passengers annually, followed by Elgin at 190,000. 

The research reveals that rail contributes substantially to the region's economy. It supports 1,506 FTE jobs, which would not exist without the rail network, even after allowing for "leakage" of expenditure from the Highlands and Islands by local residents who make rail trips to other parts of the country.  Around 450 of these are directly or indirectly rail-related, while the remainder are jobs supported by expenditure from leisure and business visitors travelling into the region by rail.  Over a third of tourists using the rail network would not visit the area if rail services ceased. 

Local people are also important users of the rail network.  In the "on-train" surveys carried out for the study, 40 per cent of interviewees were Highlands and Islands residents. 

The economic cost of losing the rail network, in terms of additional time, travel costs, loss of the ability to work on the train and other disadvantages to individuals and businesses was calculated at up to £493 million over 30 years. 

Rail freight has grown substantially and removes the equivalent of over 25,000 lorry loads and seven million road miles from the road network.  The environmental benefit of this has been calculated as £47 million over 30 years.  Recent developments have included parcels traffic to Inverness and oil traffic to Lairg and Fort William. 

Other key findings include: 

·    Contribution to social inclusion: 40 per cent of residents questioned in "on train" surveys did not own a car, compared to the average of 25 per cent for the region's population as a whole.  22 per cent of trips on the rail network are undertaken to visit friends and relatives.  

·    Retention of population: on some lines, over 20 per cent of residents said they would move to a larger town or leave the region entirely if rail services ceased.  

·    Supporting an integrated transport network: 10 per cent of local people interviewed were island residents.  Passengers travelling to/from one of the islands comprised 22 per cent of those surveyed on the Oban line. 

·   Environmental benefits: new commuter services reduce congestion on roads.  Over a 30-year period, the environmental benefits from lower car traffic, through reduced noise, air pollution and other factors, are calculated at £20 million.

Mike Connelly, the Strategic Rail Authority's national communications manager for Scotland said: "The Strategic Rail Authority welcomes the initiative taken by HIE in developing the Case for Rail In the Highlands & Islands. We look forward to giving the document our consideration and we are confident that it's something that can feed into the future Scottish Planning Assessment."


Final Report - March 2004
Prepared for - Highlands and Islands Enterprise


1.1 This Report presents the findings of a study undertaken by Steer Davies Gleave,
commissioned by Highlands and Islands Enterprise, to establish the economic, social
and environmental benefits derived from the rail network in the Highlands and
Islands. The core of the study was concerned with economic impacts, but also the
value of social and environmental impacts.

The Case for Rail in the Highlands and Islands
1.2 This Study has identified a range of benefits that the railways bring to the Highlands
and Islands by quantifying the negative impacts that would occur in the absence of a
rail network. The rail network plays five principal roles which are significant for the
economic, environment and social well being of the Highlands and Islands:
· First, rail contributes substantially to the economy and especially value of the
tourism sector in the Highlands and Islands: rail creates net expenditure which
supports some 1,506 FTE jobs;
· Second, rail underpins the viability of businesses in the Highlands and Islands:
many businesses located in the region have markets located outside the region,
such as in the Central Belt, England or abroad. Access by rail to urban centres in
the Highlands and Islands, Central Belt and further south is essential for
successful businesses, not only for accessing markets, but staff travel, suppliers,
training and conference opportunities;
· Third, the rail network plays a role in encouraging social inclusion and
preventing migration out of the region, particularly for residents on islands or in
remote mainland areas without access to a car, as well as for residents wishing to
travel to the nearest urban centre for leisure, work or education activities. The
presence of rail encourages people to live and work in the region;
· Fourth, as Inverness and the Inner Moray Firth area grows it will increasingly
require public transport services if that growth is to be sustainable. Recent
improvements to services around Inverness have resulted in a marked increase in
usage, particularly for commuting journeys – any reduction in these services will
have a negative impact upon the ability of that sub-region to grow sustainably;
· Fifth, the rail network provides an alternative to road transport and a significant
amount of freight is currently transported by rail. The absence of a rail network
would see this trend reversed.

Passenger Rail Demand
1.3 Rail demand within the Highlands and Islands has grown over the last five years,
particularly on the Far North Line, where patronage has increased by around 50%
since 1997. Patronage on the Kyle Line has increased by just under 40%, by 35% on
the Highland Main Line, 13% on the Aberdeen to Inverness Line and 20% on the
West Highland Line. Overall patronage on day rail services across the ScotRail
network has increased by 37% since 1997.

1.4 The general trend has been upwards and it is expected that rail demand will continue
to grow. Approximately 1.3 million passenger journeys originated in the Highlands
and Islands in 2002-2003, just under two percent of all passenger journeys originating
in Scotland (62.2 million).

Survey Findings
1.5 A survey of train passengers travelling on ScotRail services to, from, or within the
Highlands and Islands was undertaken by Steer Davies Gleave between 21 st August
2003 and 22 nd September 2003. A total of 941 questionnaires were completed in face-to- face interviews on board day trains in the Highlands and Islands area. A further 408 interviews were undertaken with passengers on the Fort William and Inverness sleeper services.

Day Services

1.6 Across the network, leisure purposes - particularly holidays (away from home), short
breaks and VFR (visiting friends and relatives) - predominate:
· The journey purpose of holiday was the most common of those people travelling
on the network as a whole;
· The Kyle and West Highland Lines are used more frequently by rail passengers
on a holiday or short break. Over 50% of passengers interviewed on the Kyle
Line were on holiday, while just over 40% of passengers on the West Highland
Line travelling to or from destinations en route to Mallaig were on holiday; and
· Visiting friends and relatives (VFR) was the second most common journey
purpose among those passengers interviewed, with 22% of all passengers
undertaking this type of trip; of all passengers interviewed 33% on the Far North
Line, 25% on the Aberdeen Line and 25% on the Highland Main Line were
visiting friends or relatives.

· Most business trips are undertaken on the Aberdeen and Highland Main Lines;
· Around 20% of trips on the Aberdeen and Highland Main Lines respectively
were for employers’ business; and
· Across the network, 37% of business passengers said that they were undertaking
work while on the train. These passengers also stated how much time on average
they spend working while travelling on the train. This is important from the
perspective of the economic value of the network, as work undertaken on trains
would potentially be lost if people had to travel by car or bus in the absence of the
rail network.

1.7 The ability to commute by rail within the Highlands and Islands has increased
substantially over the last few years. This is especially the case in the Inverness area
due to:
· Re-opening of Beauly station;
· Tain commuter service; and
· Invernet Project, due to commence in Spring 2005.

1.8 In terms of social inclusion, access to employment and education opportunities as well as leisure activities are important elements of everyday life for residents within local communities in the Highlands and Islands. Access to activities such as shopping, restaurants and cinemas are important for the development of sustainable rural communities. However, many people living in remote areas require to travel significant distances in order to access these facilities, for which the rail network is an
important facilitator, particularly for young and elderly people who do not have ready
access to private cars.
Sleeper Services

1.9 Passengers travelling on the Fort William sleeper were in the main undertaking a
holiday or a short break (33% and 47%). Other journey purposes were much less
important, and VFR was the next most significant purpose (seven percent).

1.10 In contrast there was a more balanced mix of journey purposes on the Inverness
service. The main purposes of journeys on the Inverness sleeper were holiday (30%),
VFR (25%) and short breaks (20%). Those travelling on employers’ and personal
business together accounted for some 20% of journeys.

1.11 Residents tend to travel more frequently on sleeper services than non-residents, with
13% of residents travelling at least once a month compared with four percent of non-residents.
The frequency of travel on the sleeper by residents followed slightly
different patterns depending on journey purpose: for example, 26% of business
travellers travelled on the service once a month or more frequently.

1.12 The sleeper service is important to Highland and Islands resident business travellers as it provides an opportunity to travel overnight to London, conduct a day’s business and return the following day. The attraction of the sleeper service is that it should allow users to make more productive use of their time by travelling overnight. Similarly, the link exists for customers, suppliers and other company locations to make visits to the Highlands and Islands more easily.

Economic Impact Valuation: EALI Impacts
1.13 In measuring the economic benefits of the rail network two approaches have been
used, namely an economic impact appraisal which measures the “real economy”
effects due to the network, and a social welfare approach which measures the
economic value of travel benefits to users. The first measurement approach uses
employment as the measuring rod, which is a familiar one to organisations such as
development agencies, while the welfare economics approach is more familiar to
transport planners.

1.14 As the basis for both approaches it was necessary to define a counterfactual scenario
with which to compare the actual scenario in which the rail network exists. In
approaches the counterfactual is taken to be complete closure of the whole network
except for lines which are already owned by rail preservation or enthusiast groups.

1.15 The real economy approach considers the benefits at the level of the Highlands and
Islands only. The most direct impacts arising from closure of the network are those
internal to the rail sector, including employment in bodies such as ScotRail and
Network Rail. In addition there are impacts external to the rail sector, which include
impacts arising from changes in travel behaviour and multiplier effects.

1.16 Where users change their travel behaviour there are real economy impacts, for
example where rail-using tourists decide not to come to the Highlands and Islands or
stay fewer nights. These travel changes impact upon levels of expenditure within the
Highlands and Islands whose employment effects can be measured. Multiplier
analysis enables indirect and induced effects to be captured as well as the direct effects.

1.17 We estimate that a total of 1,506 FTE jobs in the Highlands and Islands would be lost if the rail network were to close. Of these, 400 FTE jobs would be lost directly and after allowing for offsetting growth in other transport sectors and multiplier effects, the net effect would be 476 FTE jobs; in addition there would be an estimated 1,080 FTE jobs lost due to changes in business and leisure travel plus associated multiplier effects. Additionally, the closure of the rail network would bring about creation of some 50 FTE jobs which currently do not exist because people are able to work on trains. The latter finding is based on assumptions which are consistent with the transport economic analysis. This and a 30-year assessment of impacts are discussed in a separate appendix (Technical Report 1: Economic Analysis).

Social Welfare Valuation: TEE Impacts
1.18 A substantial welfare dis-benefit occurs with the loss of the rail service –
approximately £298 million dis-benefit (present value, discounted over a 30-year
period). This comprises:
· £59 million loss to consumer (non-work) travellers;
· £61 million loss to business sector;
· £119 million lost to transport operators;
· £47 million lost to freight; and
· £12 million lost to society as a result of increased road accidents.

1.19 The welfare loss is driven by the busier lines (Highland Main and Aberdeen Lines),
the Inverness sleeper and by losses to businesses. These lines within the Highlands
and Islands account for nearly £166 million of the dis-benefit; that is, just over 60%.

1.20 Losses to business account for £227 million of the total loss calculated. Of this
approximately £61 million (24%) occurs to business travellers and £119 million (52%) in lost revenues to transport operators.

Sensitivity Test
1.21 In the TEE analysis it was assumed that those who do not travel in the absence of a
rail network will experience no social welfare loss. This is in fact a minimum value
and as an alternative we assumed that the loss of welfare they experience would have
a maximum value of the fare plus the time costs. On this basis the loss experienced by
consumers would increase by a further £123 million, giving a total loss of £182
million for consumers (up from £59 million). This plus dis-benefits to business
travellers (£13 million) would take the total social economic loss of losing the rail
services within the Highlands and Islands area to approximately £493 million (present value, discounted over a 30-year period).

1.22 A quantification of user and non-user freight dis-benefits based on the Strategic Rail
Authority guidelines for appraisal, using the Sensitive Lorry Mile (SLM) calculation
has been undertaken.

1.23 It is unlikely that there will any real impact across the sector or that costs incurred
through the switch of mode would be passed on to customers, although if the current
shortage of lorry drivers continues there could be issues of capacity and upward
pressure on haulage costs. The actual cost difference between moving goods by road
and by rail is negligible (as reported in surveys undertaken), as companies are offered
grants to make up the gap between the two costs – this incentive is used to encourage
them to use rail rather than road. For companies located outside the Highlands and
Islands, such as the major retail companies, the main impetus behind using rail is
based on green policies. No real cost savings are made through use of rail, though a
marginal increase in reliability has been achieved.

1.24 Movement of goods by road would increase in the absence of rail: an extra 7.3 million lorry road miles and more than 25,000 lorry loads.

1.25 The costs associated with each route are applied to the number of lorry miles and
discounted over a 30-year period. Assuming that in the absence of rail all goods
moved to / from the Highlands and Islands would be transported to the nearest freight
railhead, located in the Central Belt, the total cost likely to accrue is just under £47
million (present value, discounted over a 30-year period).

Accidents and Maintenance
1.26 In terms of the external costs of rail travel associated with the increase in road
maintenance and in accidents, the loss of the rail network will impose a cost of £12
million on society (present value, discounted over a 30-year period). There will be no
significant increase in road maintenance costs. The number of additional personal
injury accidents in the first year of appraisal anticipated is 5.5, while over 21 million
vehicle kilometres would be imposed on the road network in the first year of appraisal.
Environmental Impacts

1.27 As rail travel has well publicised environmental advantages over other modes the loss
of the rail network within the Highlands and Islands area would impose an
environmental cost to society. Using the Case for Rail (Steer Davies Gleave, 2002)
figures this cost has been monetised at approximately £20 million (present value,
discounted over a 30-year period). This value reflects environmental costs of noise,
air pollution, climate change, nature and landscape, urban effects and up and
downstream processes as well as congestion. Such a valuation however is based on
off the shelf valuations related to changes in vehicle kilometres, and does not include
the value of the loss of intangibles (e.g. built cultural heritage).

Social Impacts
1.28 Rail is important for people wishing to undertake social or leisure trips, as well as
accessing employment opportunities and travelling on business. Access to educational
opportunities within the region and outside it (e.g. Central Belt) is also important.
Salient points are:
· The percentage of younger people aged between 16 and 29 is lower than the
Scottish average (2001 Census): good public transport links play an important
role in encouraging younger people to remain in the region, either for education
or employment purposes;
· The level of private transport in the Highlands and Islands is on average higher
than that for Scotland as a whole. However, car ownership is not the same as car
availability, and in terms of car availability some settlements within the region
are well below the average for Scotland. Just over 22% of Highlands and Islands
residents interviewed did not have access to a car;
· The Tain commuter service and proposed Invernet Project are key improvements
to the existing range of rail services and will have beneficial impacts: residents
living along the route of the Tain commuter have benefited already, while those
living south of Inverness will be able to commute to work / education by rail
when the Invernet Project is implemented;
· The rail network provides key interchange opportunities for those without access
to a car travelling to the islands, and similarly, from the islands onward to
destinations throughout Scotland and beyond: around 10% of Highlands and
Islands residents interviewed were resident on an island; and
· The absence of a rail network would influence some Highlands and Islands
residents to consider relocation of home and / or place of work. Around 15% of
residents interviewed on the Oban branch of the West Highland Line and Far
North Line respectively stated that they would be strongly or very strongly
influenced to move to a larger town, while just under 10% of residents
interviewed on the Aberdeen and Highland Main Lines would be influenced to
change employers.