Note – Links to the other 4 memoranda in this series are at the foot of this one.

Draft 5

Technical Memorandum 4:

Subject: Why trams are essential to improve city productivity
Date: June 2025
Prepared for: Bristol and Bath Tram Association / West of England Transport Association

Executive Summary

This memorandum outlines why modern tram systems—always integrated with bus services—are essential for enhancing productivity and economic performance in UK cities. The UK’s chronic productivity problems, frequently lamented by policymakers, are strongly linked to poor urban mobility. Cities overly reliant on buses and cars fail to move people, goods, and services efficiently.

Trams uniquely address this challenge by enabling a “large, connected city” effect: fast, reliable, high-capacity access to labour, customers, and services [1]. Unlike buses, trams operate with dedicated infrastructure and Green Wave Traffic Light Pre-emption (GWTP)—a capability technically feasible for buses but rarely effective in practice—ensuring dependable schedules and a much higher modal shift from cars (typically 20% vs 4–6.5% for buses) [7, 8]. This shift eases congestion and supports agglomeration economies—the clustering of high-value economic activity, especially in knowledge and service sectors [2].

Evidence from cities such as Nottingham [3], Croydon [6], and several international examples [5] shows that tram systems attract inward investment, raise property values [4], improve access to jobs, and increase city centre footfall. While often seen as expensive, tram infrastructure is a productive long-term investment. It delivers direct returns (fare revenue, land value uplift) and indirect benefits (business creation, employment growth) whose annual cash value will exceed the cost of government borrowing [9], otherwise they are not built.

To resolve their productivity crisis and unlock economic potential, British cities must treat tram investment not as an option, but as a strategic necessity.

Why Trams Are Vital for Urban Economic Vitality

Modern trams—like other forms of urban rail—play a pivotal yet undervalued role in strengthening city productivity. They enable what economists describe as a “large, connected city effect”: fast, affordable, and reliable access to jobs, customers, services, and opportunities across a metropolitan area [1]. This effect fuels agglomeration economies—dense, high-output clusters of economic activity—particularly critical in the service and knowledge sectors [2].

Trams are especially well-suited to this role. They provide attractive, high-capacity mobility through congested corridors and are less vulnerable to disruption than buses. This effect is widely seen in high-performing European cities. Its absence in most British cities is a key reason for the UK’s persistent productivity gap [2, 5].

The Connection Between Trams and Productivity

UK productivity continues to stagnate compared to European peers [2]. Though commonly blamed on weak investment or skills, a deeper and often overlooked driver is poor urban mobility. In car- and bus-dominated cities, people cannot move reliably or affordably between homes, jobs, and services. This disconnect undermines the benefits of urban scale and density.

As highlighted by CityMonitor, cities like Birmingham or Bristol may appear large on a map but functionally behave like small towns at peak times—because their workforces, customers, and suppliers cannot move efficiently across the city [10].

Trams overcome this constraint because with GWTP they can move 5 times as many people quickly, reliably, and economically across a city, compared to buses and cars which become mired in traffic.

UK Parliament Transport Committee evidence shows that tram systems consistently achieve much higher modal shift from cars—typically 20–30%, compared to 4–6.5% for even enhanced bus systems. This can lead to traffic reductions of up to 14% post-implementation [7]. Mode choice studies confirm that users view trams as more reliable, comfortable, and attractive than buses [1].

Importantly, trams operate reliably even in mixed traffic. Using dedicated rails and traffic signal pre-emption, they maintain consistent schedules through congested areas. Trams also use road space with remarkable efficiency: to move the same number of passengers, a tram takes up 1/12th the space of cars and 1/5th that of buses [11].

The “Large Connected City” Effect and Investment

For high-value employers, access to a broad labour pool within a 30–45-minute commute is critical. If workers face 90-minute bus journeys for 30-minute distances, businesses will relocate—or never invest. This reality was reflected in Nottingham, where German firms insisted on tram construction as a condition for investment. Small businesses also benefit—mobility drives footfall and sales [14].

Research from Nottingham Trent University found that the Nottingham Express Transit (NET) expansion enhanced labour market integration and supported other strategic development objectives [3]. Broader studies confirm that enhanced public transport—particularly rail—amplifies agglomeration and raises productivity [2].

Tram infrastructure also increases property values. A 2019 study in Wednesbury found residential values rose by £16,500 per kilometre closer to tram stops [4]. Croydon’s Tramlink has drawn investors, boosted commercial development, and maintained retail footfall even amid redevelopment [6, 13]. Meta-analysis confirms this pattern across light rail systems globally [4].

Further, research from the OECD and Centre for Cities highlights that UK cities outside London are markedly less productive than their European counterparts due to smaller “effective labour markets”—a result of poor public transport. For instance, while Rome and Manchester have similar populations, Rome is 55% more productive, partly due to superior urban transit [5].

In effect, trams expand a city’s functional size without enlarging its geographic footprint. They allow more people to reach more jobs, services, and opportunities quickly, enabling density, specialisation, and growth. This is all explained in this presentation [15].

Why Trams, Not Buses?

Of course, a viable bus network is also essential to complement the tram network for less-travelled routes, but it will not work on its own.

The claim that buses can deliver the same outcomes more cheaply ignores both physical constraints and user preferences. Most motorists will not switch to buses—but they will switch to trams [12]. Trams provide a superior experience, greater reliability, and lower per-passenger costs when operated at scale.

Even where bus lanes exist, they are often contested and prone to interference. Buses cannot consistently replicate tram capacity or ride quality.

A key differentiator is Green Wave Traffic Light Pre-emption (GWTP). This is not merely signal priority at junctions—it is coordinated city-wide signal management that creates a continuously green corridor, precisely timed to the tram’s approach. It allows trams to glide through mixed-traffic streets as if the cars weren’t there.

Trams, with fixed, predictable alignments, enable precise GWTP activation. Buses, with flexible routes and inconsistent spacing, make this infeasible. Implementing GWTP for dense bus services would require so many vehicles that they would interfere with each other, defeating the system’s purpose [8].

Wherever they operate, trams attract not just public transport users—but significant numbers of motorists. This is essential to reducing road congestion and enabling efficient urban flow. The UK’s bus-first strategy has consistently failed to achieve this shift. Cities like Zurich, Vienna, and Freiburg, by contrast, centre their networks on trams and enjoy far higher public transport mode shares [5].

Public Investment and Returns

Cost is frequently raised as a barrier to tram implementation. But this overlooks the investment nature of tram infrastructure. Unlike subsidies or short-term tax cuts, trams produce long-lasting returns that exceed borrowing costs. This is because trams are not built unless they can meet this return hurdle.

Direct returns include fare revenue and land value gains. Indirectly, trams attract firms, boost employment, and support new business creation by restoring efficient, city-wide access [9]. Economically, tram networks function as a high-yield public asset.

Despite political rhetoric, the UK can borrow for productive investment. What matters to markets is not the size of national debt, but whether borrowing funds assets that generate long-term returns. Trams fit that definition precisely [9].

Conclusion

The UK’s urban productivity crisis is, at heart, a transport crisis. Trams are a proven, economically sound solution—offering fast, reliable, and space-efficient transport through congested urban corridors. They enable agglomeration economies, attract investment, and support dynamic, resilient cities.

For cities that want to thrive in the 21st century, trams are not a luxury—they are a necessity.

References

1. Cervero, R. (2001). Transport and Land Use: The Interface.
2. Graham, D. J., & Gibbons, S. (2019). The Effect of Agglomeration on Firm and Worker Productivity. Regional Science and Urban Economics, 78, 203–219.
3. Rossiter, W., et al. (2015). NET Phase Two Local Economic Evaluation. Nottingham Trent University.
4. Li, H., & Chen, J. (2018). The Impact of Light Rail Transit on Property Values: A Meta-Analysis. Journal of Transport Geography, 69, 1–10.
5. OECD (2020). Enhancing Productivity in UK Core Cities.
6. Centre for Cities. (2020). Croydon Tramlink Economic Impact Report.
7. UK Parliament Transport Committee. (2020). Modal Shift and Traffic Reduction: Evidence Report.
8. Jacobs Engineering. (2021). Green Wave Corridor Pre-emption Performance, Nottingham.
9. Bristol & Bath Tram Association. (n.d.). Why Trams Justify Borrowing and Deliver Economic Returns. https://bathtrams.uk
10. Forth, T. (2019). “Birmingham isn’t a big city at peak times.” CityMonitor.
11. Bristol & Bath Tram Association. (n.d.). Relative Carrying Capacity: Cars vs Buses vs Trams. https://bathtrams.uk
12. Bristol & Bath Tram Association. (n.d.). Car Drivers Will Not Use Buses But Will Use Trams. https://bathtrams.uk
13. Siraut, J. (2004). Economic and Regeneration Impacts of Croydon Tramlink. WIT Press. Summary via Bath Trams: https://bathtrams.uk
14. Harrison, R. (2025). Personal communication. Managing Director of R&L Harrison Ltd, Chairman of Tramlink Nottingham Ltd, Tramlink Nottingham Holdco Ltd and Tramlink Nottingham FINCO Ltd. Chairman of the Light Rapid Transit Forum and Director of UK TRAM. Also a Governor of New College Nottingham (NCN) and Chairman of the NCN Finance Committee. Member of the Confederation of British Industry (CBI) East Midlands Regional Council.
15. Walmsley, D. (2018). What Trams Do for Cities. https://bathtrams.uk/cms/wp-content/uploads/2018/12/What-trams-do-for-cities-David-Walmsely.pdf

Links to other memoranda in this series:

1. ComparativeBenefits of Trams and Buses in Urban Public Transport
2. Dispelling the myth that trams need special seperate segregated path through traffic
3. “Glue-in-the-Road” TramTrack Systems versus Conventional Deep Excavation Methods
4. Why trams are essential to improve city productivity
5. Overhead wire-freeTechnologies for Tram Propulsion
6. Birmingham Tramworks Show Utilities Don’t Always Need to Be Moved: Minimal-Dig Track Methods in Action – A UK & International Perspective