Underground, overground: London has built about as good a transport network as it could, given its constraints. Time to remove the constraints

Underground, overground: London has built about as good a transport network as it could, given its constraints. Time to remove the constraints

Oct 19th 2013 |From the print edition

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FROM his offices high above Victoria station, Glenn Keelan, an engineer, looks down on a hive of activity. Huge diggers chew up and spit out earth just outside the 19th-century façade of the original station. Nearby, workers are lowered in boxy metal cages to work on an emergency entrance. By the time the extension is finished in 2018, the Tube station will be three times bigger. It needs to be: Victoria now has more people going through it than Heathrow airport, and its traffic has increased more quickly over the past four years.Whereas the number of people driving in London is falling, Tube and bus use is surging (see chart). Each day 3.7m people use the Underground while 6.4m take a bus. Once-quiet routes are crammed. The London Overground, a rebranded and improved railway line, carries 120m passengers a year, up from just 33m in 2008. The Docklands Light Railway carried 66m passengers in 2008. It now carries 100m.

For years transport in London lacked investment and a high-profile champion. The creation in 1999 of an elected mayor and Transport for London (TfL), the authority behind the city’s networks, changed this. The two men who have represented London, Ken Livingstone and Boris Johnson, have few responsibilities beyond transport, so they have been able to focus on coaxing money out of the Treasury. TfL has been compared to an occupying army—frequently unpopular, but ruthlessly efficient at getting the job done.

Still the system groans. Several parts of the Tube network are congested: Victoria station routinely closes because of overcrowding, and the Northern line is packed. More supply seems to create more demand. The eastern part of the London Overground was meant to take 6m people a year off the bus network. But new passengers came and took those places instead. The pressure is bound to grow quickly. London’s population, currently 8.2m, is expected to exceed 10m by 2030.

Fast, cheap and out of control

The changing character of the capital makes things trickier. Much of the city’s population growth over the past decade has been in east London, which is poorly served by the Tube. Parts of inner London such as Kensington and Chelsea have lost people. In future, thinks Sir Peter Hendy, TfL’s boss, most population growth will be in the suburbs. Yet jobs are becoming increasingly clustered in the middle—in the City, Canary Wharf and the West End. “If you’re an insurance company, you don’t look at a map and settle on Enfield,” says Sir Peter. London will not just have more people: it will have more people travelling farther to their jobs.

Projects are already underway to deal with this. Automatic signalling is being introduced on the Northern line so that more trains can run more frequently. There are plans to extend the line to Nine Elms in Battersea. Antediluvian rolling stock on most of the other routes will be replaced by air-conditioned trains; signalling will be improved too. The first section of Crossrail, a new east-west train service, will open by 2016. The mayor and TfL are lobbying hard for Crossrail 2, a mooted north-south line that would cut through London either as a metropolitan system or as part of a longer railway network.

 

Grand projects help, at huge cost. But there is a simpler, cheaper way of adding capacity, insists Sir Peter: make much better use of London’s huge existing commuter railway network. Which means giving him more control.

TfL has been granted the West Anglia route, which runs from Liverpool Street through east London. As with the Overground, it will run under a concession rather than a more complex rail franchise. This means TfL taking on most of the financial risk, and with luck making it efficient. If the mayor gets his wish, other lines may join West Anglia in TfL’s embrace. “We need to start thinking about rail as a supplementary link to the Tube,” says Isabel Dedring, the deputy mayor for transport.

This power grab worries some. Members of Kent County Council initially bristled at the idea of London-run lines slinking through their county. Surely the city would cut back on trains beyond its boundary, they said. But such anxiety is misplaced, thinks Christian Wolmar, a transport expert. If commuters are travelling to London, the city and passengers would benefit if TfL had control over those lines. Stations blighted by lack of investment would be refurbished; auxiliary routes would be connected to the busier central lines.

London’s transport could be improved even more if the mayor were given control over local taxes. Crossrail is being financed through a combination of government cash, fares and an increase in land values. A business-rate supplement on non-domestic properties with a rateable value of £55,000 ($80,000) or more has supplied £4 billion for the project. This arrangement could be extended for Crossrail 2, and more widely.

As elsewhere, but even more so, investment in London transport helps the economy. The city accounts for nearly a fifth of Britain’s economic output. But the benefits are local, too. Since the London Overground came to Hackney, house prices have jumped by 25%. Only parts of central London have seen faster rises.

Hackney Central, a shiny new Overground station, is surrounded by chic bars and organic coffee shops. Down the road is Hackney Downs—a decrepit, little-used train station currently run by a rail operator. By 2015 it will be part of TfL, however. When it reopens it will be a test of TfL’s powers and its ability to change London for the better.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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