[2025] UKUT 00138 (LC)

As to the market share that the claimant would achieve in the P3 contract in the no scheme world, the parties’ positions mirror each other. Mr Jarvis predicted that the claimant would secure 60% of the market during the P3 contract and beyond, and TWM 40%; he said that on the basis of WWH’s good record and of its position with access to the WCML, and because it produced far more specialist sleepers than did TWM; overall Mr Jarvis clearly regarded the claimant as the better supplier. Mr Heubeck on the other hand took the view that the claimant would secure only 40% of the market with TWM as the cheaper, more efficient and better-positioned supplier selling 60% of the sleepers required. He regarded the cost of trip trains taking sleepers from WWH to Bescot as an important reason for that outcome.

We are unable to accept either expert’s prediction, for three reasons.

The first is that it is not possible to find that either of the suppliers in the duopoly was in general in any sense better, cheaper or more efficient. We take seriously Mr Jarvis’ enthusiastic commendation of the claimant as NR’s trusted supplier, always flexible and able to provide any kind of sleeper however specialist and its go-to adviser for any kind of sleeper problem. But inevitably by 2030 or so in the no scheme world things have moved on, personnel will have changed, and the claimant’s plant at WWH is getting old. Cemex’s market share approached 60% in the real world at a time of high demand, but it has not achieved that level of market share since TWM has been at full production. Overall requirement is now, and will be in all the years now being considered, far lower than it was when Cemex had that share. Even the trip cost, which was so important a factor in Mr Heubeck’s assessment, is unknown when we look years ahead. Furthermore, by 2026 a new contract at Doncaster would be in place, probably but not inevitably with an MGV, probably with prices designed (whether by TWM or another manufacturer) to be competitive against the claimant’s prices. So the years ahead are hard to predict and for that reason alone neither expert’s view is wholly persuasive.

The second reason why neither can be entirely correct relates to the period from April 2020 to date and arises from what we have found about levels of requirement and about the absence of an MGV in the P3 contract at WWH. In order to explain that, it may be helpful if we repeat our findings for NR’s sleeper requirement in the relevant period and beyond, setting out with each finding the figures for 40%, 50% and 60% of the total figure. For the future, beyond 31 March 2025, our findings take the form of averages across each five year period rather than of an annual requirement:

In those first five years to 31 March 2025, in which the requirement is known rather than being a finding by the Tribunal, we can see that in this period there is no possibility of the claimant securing 60% of the market because in each year TWM’s MGV guarantees it over 40% of the requirement. In 2023/24 the MGV accounts for more than 50%, and in 2024/25 for more than 60% so that Cemex could not even have achieved 40%.

In the remaining years until the end of 2036 (in accordance with our findings on duration we go no further) we have made findings only about average requirements across Control Periods. During those remaining years, if there is still an MGV in the Doncaster contract and if it still stands at 200,000, then the market share the claimant can achieve does not reach 50% until (probably and approximately) 2030. However, whilst we think it likely that there will be an MGV in the Doncaster contract from 2026 onwards we think that in view of current levels of requirement it would be set at less than 200,000 per annum in the no scheme world. It would be more likely to be 150,000 or 100,000; on that basis either supplier might achieve 60% of the market at any stage from now on; but, as we said above, we have insufficient information about either supplier to say that either would be likely to do so.

The third reason why neither expert appears to us to be correct arises from the fact that we are looking at a duopoly in a situation where NR’s annual requirement is, and will be for some time, much lower than it has been in the past. NR has only two suppliers. The experts agreed that NR would not want to create a situation in which it had only one supplier, and we find that it would not be in NR’s interests to favour either supplier in the future in the no scheme world where requirements are so low that both suppliers may be operating near the margins of profitability. We remind ourselves of the price banding system; purchasing just the MGV from one supplier would be more expensive per sleeper than purchasing rather more than the MGV – but how much more expensive that would be, and how many more would need to be purchased to achieve a lower price band, is unknown, as is the MGV at Doncaster after 2025. Even if the price banding dictated that in one particular year one supplier got the majority of the orders and the other could not pay its rent, we do not think that NR, taking the long view about the need both to ensure supply and to preserve a market (however limited) would let that happen. It would be in NR’s interests to hold a balance between the two suppliers even if that meant that the cheapest option was not always taken.

Doing the best we can with the information available we find that the claimant cannot show that it would have achieved more than an equal market share in the P3 contract in the no scheme world, and that the compensating authority cannot show that it would have achieved less than 50% overall (even though as we observed above that would be the outcome in two identifiable years). We find that the claimant’s market share in the duopoly on the balance of probabilities would be 50%, subject to one quite tricky point.

That tricky point is the authority’s argument that once the claimant’s lease of Area B comes to an end in 2026 it will have insufficient storage capacity to cope with a demand of more than 196,000 sleepers per annum. To that argument we now turn.