10 March 2009

An unexpected investigation

Last Thursday saw a shock announcement by the Office of Fair Trading (OFT) that astonished the bus industry: it plans to undertake a full investigation into local bus services.

The catalyst for the investigation, says the OFT, is the recent spate of take-overs and mergers that have involved the 'big five' operators in the UK and details of whether or not this has been detrimental to the public will be examined and reported on.

Bullocks sold to Stagecoach last year, ending competition along Manchester's Wilmslow Road Corridor - a route regarded as a flagship example of privatisation, but have passengers lost out?

Many of those within the industry feel that such an investigation at a time when the UK's economy is facing a recession that looks likely to be the worst in a generation is incredibly bad timing and that had it not been for the 'big five' to make the moves they did in the current climate, the operations they purchased would have folded, leaving passengers in those areas of the UK with potentially no bus service whatsoever.

They said they'd never sell, but they did, and to their competitor, too. But will passengers benefit from Stagecoach's advance into the city of Preston now that it owns PrestonBus?

The OFT - never shy at making unpopular decisions - says that right now, March 2009, around 66% of the bus industry is operated by the 'big five' - Stagecoach, National Express, First, Go-Ahead & Arriva - and that the industry has not been so monopolised since privatisation in the mid-to-late 80s.

Working with local authorities, bus operators and the government, the OFT inquiry will look at:
  • Whether or not there is competition between operators bidding for contracts
  • If the concentration of the market has had a positive impact on passengers and the prices they pay to travel and the level of service they receive
Rather awkwardly for one of the 'big five', Arriva, the report was announced at the same time it revealed a 30% increase in pre-tax profits, to £150 million - though slightly less than had been expected.

Arriva paid KMP to end its competing service in North Wales, but did passengers benefit by their actions?

The OFT's Chief Executive, John Fingleton, said "The OFT receives regular complaints about bus prices, service levels and a perceived lack of competition between companies bidding for tenders. At the same time many claim that even where there is competition it has failed to deliver improvements in local bus services. The study will test these issues against the available evidence.

Perhaps the most controversial acquisition of the past year was that of Cavendish Renown by Stagecoach, only for them to signal their intention to close the business down, allowing their neighbouring operator, and recent purchase Eastbourne Buses, room to expand - but will passengers benefit?

I suspect that, so long at the industry's house is in order and that they really are weathering the recession while acting honorably, professionally and legally, they have nothing to worry about. If the OFT, like many companies up and down the land, can see the possibility of a cut in its workforce, the announcement of such a study will certainly alleviate it from happening for now... (GL)