Train passengers could face higher fares due to merger – watchdog

The supply of mainline signalling in Britain suffers from a lack of competition.

Hitachi’s proposed purchase of Thales’s rail infrastructure business could lead to higher fares for passengers, the competition watchdog has found (Tony Smith/Alamy/PA)

Hitachi’s proposed purchase of Thales’s rail infrastructure business could lead to higher fares for passengers, the competition watchdog has found.

The Competition and Markets Authority (CMA) said the 1.7 billion euro (£1.5 billion) deal announced in August 2021 “could eliminate a credible competitor” from Network Rail’s new tendering process for mainline signalling.

It added: “The resulting loss of competition across both mainline and urban signalling markets could increase costs for Network Rail and TfL (Transport for London) and have an adverse knock-on effect on taxpayers and passengers.”

The loss of competition could risk higher costs and lower quality services

Colin Raftery, CMA

A recent market study, carried out by rail regulator the Office of Rail and Road, found the supply of mainline signalling in Britain suffers from a lack of competition as there are essentially only two suppliers – Siemens and Alstom.

CMA senior director of mergers Colin Raftery said: “Network Rail currently spends close to £1 billion annually on mainline rail signalling – and this is expected to increase in future as equipment needs to be replaced and the UK transitions to digital signalling.

“The cost of signalling and its critical role in the safe and efficient running of our railways makes it important that we ensure that future tenders can deliver value for money.

“This deal involves two of the main competitors for future mainline rail and urban metro signalling projects, so the loss of competition could risk higher costs and lower quality services, which would ultimately come at the expense of taxpayers and passengers.”

Hitachi has an opportunity to submit proposals to resolve the CMA’s concerns on the planned acquisition will face a more thorough phase two investigation.