The prospect of a sharp increase in public spending on defence in Europe represents “a real opportunity” for the rail sector, according to a senior industry source. “Moving an entire army across Europe can only be done by rail if we want to get personnel and equipment there quickly. Roads will certainly provide a back-up and will ensure the final delivery, sort of like intermodal traffic,’ DB Cargo France CEO Alexandre Gallo, told RailFreight.com.
“On the other hand, it will be necessary to improve interoperability between countries and free up gauges to allow the heaviest tanks to pass on trains. This will undoubtedly force infrastructure managers, and especially SNCF Rėseau in France, to speed up the upgrading of key routes to the widest possible profile”, he said.
More jobs needed, not only in logistics
A study earlier this year by management consultant Kearney estimated that an increase in defence spending to 3% of GDP would require up to 760,000 new skilled workers in Europe – a clear indication of the size the industry could swell to. Indeed, recently, NATO announced plans to go much further, with member nations making a commitment to spending 5% of GDP on defence by 2035.
A number of defence industry firms are already pursuing a recruitment drive. Rheinmetall, in Germany, Europe’s largest ammunition manufacturer, is said to be increasing its workforce by approximately 29% (9,000 workers), by 2028. Moreover, waning demand in the automobile industry sees brands, such as Volkswagen and Daimler, eyeing growth in military vehicle production.
Kearney’s study did not evaluate the impact of increased defence spending on demand for logistics specifically. However, one of its authors, Guido Hertel, noted that in Germany, the authorities had drawn up documents outlining the concept of Drehscheibe Deutschland, which acknowledges the country’s new role as a logistics hub in the event of a large-scale defensive operation.
The CEO of DB Cargo France, Alexandre Gallo. Image: © Association Française du Rail (AFRA)
Challenges and opportunities ahead
The German government is allocating additional funds to transport infrastructure development spanning railways, airports, roads and bridges. One of the priorities is to strengthen overland transport, which faces the prospect of having to accommodate more raw materials coming in via the ports.
FreightAmigo, a digital supply chain finance platform, noted on its website that the emerging boom in the European defence industry was likely to have “far-reaching effects on the logistics sector.” There would be a greater need for cross-border specialised container shipping and freight transport services, while the industry’s stringent security measures would create new challenges and opportunities for service providers.
Towards a European rolling stock leasing company?
The management of complex and intricate supply chains, necessitating advanced logistics coordination, will become a much sought-after skill, it added. Increased demand for military-related rail freight transport and logistics will have implications for the development and composition of wagon fleets, Gallo underlined.
“It will probably be necessary to pool, at European level, a fleet of wagons capable of transporting the most bulky equipment, which is currently, and more often than not, the property of the incumbent operators. If we want to make this specific market more competitive and flexible, a European ROSCO (rolling stock leasing company) could be the solution.”
He said it was his understanding that in most European countries, the armed forces outsource their rail transport needs. “I think it would be complex for them to handle such operations in-house and certainly the market can respond. We saw this when companies met the challenge of sending humanitarian aid to Ukraine, with joint operations between SNCF and DB Cargo.”