Watchdog fears eased over Tube signalling impact from rail infrastructure deal

The CMA is sticking by its provisional findings that the proposed deal would lessen competition in the supply of mainline rail signalling in the UK.

The industry is already highly concentrated (PA) (PA Archive)

The UK’s competition watchdog has said new evidence has eased its concerns over the impact of Hitachi’s 1.7 billion euro (£1.4 billion) takeover of Thales’s rail infrastructure on the London Underground signalling sector.

But the Competition and Markets Authority (CMA) said it is sticking by its provisional findings that the proposed deal would lessen competition in the supply of mainline rail signalling in the UK.

It said its investigation continues, with a final decision due by October 6.

The CMA said its inquiry group had considered new evidence and responses to its inquiry since announcing provisional findings in June, which had indicated that the deal would lead to a very limited number of suppliers able to bid for signal work on the London Underground.

Effective competition in the urban and digital mainline signalling markets is essential for ensuring the UK's rail transport systems are efficient and reliable for passengers who rely on these services

Stuart McIntosh, CMA

But it said it now believes that Hitachi would not be a credible bidder to supply communications based train control (CBTC) signalling systems on the Tube network, and therefore the tie-up with Thales would not impact competition in this market.

Stuart McIntosh, chairman of the independent Inquiry Group, said: “Effective competition in the urban and digital mainline signalling markets is essential for ensuring the UK’s rail transport systems are efficient and reliable for passengers who rely on these services.

“Having reviewed the additional evidence, which indicates that Hitachi is unlikely to be a credible bidder for signalling projects on the London Underground in the foreseeable future, we have provisionally concluded that the merger would not harm competition in the supply of these systems in the UK.

“That said, our provisional view that this merger raises concerns in the supply of digital mainline signalling in Great Britain is not affected by today’s announcement.”

The deal involves two of the leading suppliers of signalling systems for mainline and urban railway networks.

It warned in June that the takeover could drive up prices and reduce service quality for passengers, while also seeing Network Rail and the London Underground lose out on digital signalling options because it would lessen competition in the market.

The industry is already highly concentrated with a small number of suppliers, the CMA said.

Siemens and Alstom are the other two leading firms.

An in-depth probe was launched in December after the watchdog raised concerns over the deal.

Hitachi and Thales did not offer any changes to appease the fears of the CMA, so it pressed ahead with a phase two investigation.

The CMA added that the merger could raise costs for Network Rail and negatively impact the digitalisation of the UK’s rail network.

It could decide to force Hitachi or Thales to sell parts of their existing businesses to ease competition concerns, or the merger could be blocked altogether.

Hitachi and Thales began talks over the deal in August 2021.

Thales is aiming to complete the deal in the second half of 2023.