The Global Centre of Rail Excellence (GCRE) is a proposed rail testing facility located at Nant Helen and Onllwyn on the border of Neath Port Talbot and Powys, which would be accompanied by renewable energy generation, a data centre, a hotel and a technology park. Work on the GCRE is being undertaken by GCRE Ltd, a company established and wholly-owned by the Welsh Government. First announced in 2018, the GCRE has been awarded £50 million Welsh Government funding and £20 million from the UK Government as a contribution to its overall costs. However, the project has not yet attracted the necessary private funding to proceed, and the Welsh Government is considering its future.
As the Senedd’s Economy, Energy and Connectivity Committee starts a short piece of work on the GCRE, our article outlines the proposals for the project, the challenges in progressing it, and recent developments.
What are the plans for the GCRE?
The GCRE is planned to be a rail testing facility which provides a ‘one stop shop’ for testing new rolling stock and supporting research, development and certification of new rail infrastructure, technologies, processes and skills. Energy and data centre infrastructure is also planned for the site, along with a hotel and a technology park. It aims to achieve four missions:
- Rebuilding local prosperity in a community impacted by deindustrialisation by creating nearly 1,400 jobs over the first decade of its operation.
- “Making transport better” by developing “an internationally unique facility for innovation in rail and sustainable mobility”.
- Pioneering the UK’s first net-zero railway powered by on-site renewable energy and largely constructed from reused or recycled materials.
- Renewing an “amazing place” by regenerating a former coalfield site and enhancing biodiversity to help establish an attractive destination for the community and visitors.
The GCRE claims that its proposals for a ‘one stop shop’ for rail testing and innovation don’t exist “on a single site in either the UK or in Europe”. It says that European testing facilities are “limited in scope and heavily over-subscribed”, with the nearest dedicated infrastructure testing facility in Colorado, US. The Rail Forum, which represents almost 400 UK members including GCRE Ltd, says that its members must currently “find inefficient and time-consuming workaround options to prove products, systems and system integration”.
The GCRE says more than 200 companies, one fifth outside the UK, have endorsed the rail innovation project, and has published an open letter listing supporters. Rail organisations such as Network Rail, Transport for Wales and Hitachi have signed agreements or Memoranda of Understanding with the GCRE.
In relation to the other elements of the project, the GCRE ran a competition for an energy and data centre partner earlier this year. It hopes to contract with a partner by the end of 2026 subject to ministerial consent and ongoing commercial discussions.
What are the challenges in progressing the GCRE development?
GCRE Ltd is working to secure investment so the private sector holds a majority stake in the facility. Considerable private investment is required for the rail testing and innovation facility to be completed. Currently this would be around £330 million, however this figure could be reduced by additional government funding, or by income received as a result of building a data centre on the GCRE site. No private investment has been secured to date.
Consequently, the rail element of the GCRE has not made the progress intended by the previous Welsh Government. Under the original plans the GCRE was meant to be fully operational by summer 2025, however this has been delayed to 2030.
The GCRE acknowledges challenges in securing investment. Its recent paper to the Economy, Energy and Connectivity Committee said potential investors told them two main reasons why they were unable to commit to the project:
The first was uncertainty in the UK rail market, including limited visibility of future pipeline and a lack of committed revenue that could be guaranteed for the GCRE business. The second was due to the wider UK macroeconomic environment.
Additionally, until the market is confident of the rail element of the GCRE being ready for use by a certain date, the GCRE says “no customers will make a contractual commitment for its use”. The consequent lack of contracted revenue is also identified by the GCRE as “a major stumbling block to raising private funding”.
The Rail Forum says the size of the investment is too big for an individual rail industry firm to make, and suggests the competitive nature of the rolling stock manufacturing market would make collaboration between firms difficult. Therefore, it argues that a third party owning and operating the site would allow access for the entire industry, removing risks for individual firms, with benefits shared across the industry and local economies.
The previous Welsh Government worked with the GCRE to explore how the project could be further de-risked by additional public funding or a government guarantee to secure private investment. The GCRE submitted an updated Programme Business Case to the new Welsh Government in June, and expects to provide a further update this autumn.
Recently, the GCRE has “pivoted its strategy” to explore whether private investment in the energy and data centre elements of the project can help to finance the construction of the rail element. These developments would not require public funding support, and the GCRE says they would “generate a substantial one-off capital receipt”. This would help lower the cost of constructing the rail element of the project.
The GCRE also suggests that building a data centre on site could, in the longer term, “generate significant new Non-Domestic Rates revenue, which could in principle be used to fund the railway at no net additional cost to Welsh Government”. The amount of revenue that could be raised isn’t yet known, and taking this approach would require the agreement of the Welsh Government and local government, as it is different to the usual approach for collecting and redistributing business rates revenue.
What are the latest developments?
The new Welsh Government is reviewing the future of the GCRE, with the First Minister saying that:
…we have to understand what has happened as those tens of millions of pounds have been spent on the site, and what maybe hasn't happened to enable us to be at a place where there is private funding willing and able and keen to come in.
The Cabinet Minister for Enterprise, Connectivity and Energy provided a further update last month, stating that:
We've received that specialist advice, and we are now in the process of reviewing and discussing with other potential investors what the potential is. There is an incredibly important employment site here, and we're looking both at the Global Centre of Rail Excellence option, but looking at it in the round as well.
Attracting large-scale private investment to the Heads of the Valleys has been challenging at times over recent years, and the GCRE acknowledges there are risks as well as opportunities associated with the project. With the First Minister saying the Welsh Government “need to come to a decision soon” on the future of the GCRE, crunch time is approaching. Will GCRE’s ambitions for the site move forward, or will they be derailed?
Article by Gareth Thomas, Senedd Research, Welsh Parliament