How can you ensure that infrastructure assets survive and prosper in tough times? As the former chief executive of Network Rail – the owner and operator of the UK’s rail infrastructure – Iain Coucher has more relevant insights than most.
After all, when Coucher was involved in the acquisition of Network Rail – then called Railtrack – in 2002, it was from administration. The business had posted a loss for the previous year of £534 million (€621 million; $839 million) following the payout of £733 million in costs and compensation associated with the Hatfield train crash in 2000. That disaster had resulted in four fatalities – and the exposure of a number of operational failings.
“When Network Rail acquired Railtrack, in 2002, we found an underperforming business, in a badly performing industry,” Coucher who served as deputy chief executive and then chief executive from 2007 to 2010, tells Infrastructure Investor. “We had three immediate challenges: make trains run on time; restore the public’s confidence with safety on the railway; and get costs under control.”
He adds: “My previous role gave me experience of a large organisation needing to invest in infrastructure. It also gave me insights into the nuances of government and operating in a world of perpetual compromises.” He also quips that he got 16 years’ worth of experience in the eight years he was with the company.
Network Rail was not the only operational test that was handed to Coucher. Among other roles, he provided management services to Tube Lines, which struck a public-private partnership (PPP) agreement to modernise the London Underground, and was chief executive of the firm from 1999 to 2001; and, as chief executive of TranSys between 1996 and 1998, was involved in the introduction of Transport for London’s Oyster card ticketing system.
With this operational spadework on his CV, global consultancy Alvarez & Marsal (A&M) snapped up his services in November last year as a managing director. Based in the firm’s London office, Coucher will broaden A&M’s offering in the transport and infrastructure sectors across Europe. He is confident that there will be demand for his services given the tougher market conditions now being faced.
“Many transport and infrastructure operations have got big, fixed asset bases and are complex and geographically diverse,” he says. “There are high costs associated with running that. Over time the costs of operating infrastructure are rising – wages, energy bills, commodity prices etc. For years revenue has also risen so it’s been a growing market, but now margins are thin as markets are competitive and highly regulated. In the UK and the rest of Europe, revenues have started to decline slightly, and it doesn’t take much decline to expose a high cost base.”
Because markets are stagnant, Coucher believes companies have to do things differently even if they are relatively successful today. They need to think long term because, even once the need for change is recognised (which can take a while in itself), the implementation of that change can take many years.
‘Even growth markets are difficult’
He believes that companies switching their focus to other markets to replace lack of growth in their home markets may be seeking a solution that looks easy – but may backfire in reality. “The supply chain often says ‘we see opportunities in Canada and the Middle East etc’. But even in growth markets it’s difficult to compete because it’s quite competitive. People say ‘I’d like to get into India’, but it’s tough. You find you’re not only competing with local companies, but also against the same people from your own market. It’s just as tough.”
Expanding into new markets is just one of the things that Coucher would like companies to consider. Among the others are improving services, making operations more effective and improving IT. On the latter point, he says: “Many UK infrastructure companies emanate from privatisations in the 1980s and 90s and in doing so, have carried forward their old technology – designed for a different age and a different operating environment.”
Things are very different now, he concludes: “This old technology is holding companies back; wholesale investment to modernise is now required.” Doing so in difficult times like this is no easy task. But Coucher, at least, has been there before – and that’s why he feels his advice will be in demand.