Rise in profits for Stagecoach underlines public's move away from cars

Petrol prices are rocketing. Congestion is worsening. Parking is a headache. Sooner or later, the UK's driving public was going to get fed up, or priced out, of the ordeal that driving has become.

And yesterday, just as the price of diesel broke through the £6 per gallon mark – as if to underline the point – Stagecoach revealed the extent of the resulting shift taking place in UK travelling habits, publishing an 8 per cent increase in annual operating profit thanks mostly to a significant increase in bus passengers. The company, which operates local and inter-city bus services as well as regional rail franchises, earned £174.4m on sales of £1.76bn, a 17 per cent increase on the same time last year.

Robert Speirs, the chairman of Stagecoach, said the sharp rise in bus and rail users was primarily due to environmental consciousness and a new-found concern for personal health. Mr Speirs' conclusions were based on the results of a survey of 4,000 people that the company conducted. It found that nearly half the respondents, 47 per cent, were now using their cars less than they did three years ago. Pollution and an interest in getting healthier were the top two reasons cited for the change.

The findings fit conveniently with Stagecoach's strategy. The company has gone out of its way to burnish is green credentials – it made headlines last year after it launched a pilot project to fuel buses with discarded chip-fat. It has signed a deal with a small technology group for an additive that increases fuel efficiency, and has also placed a large order for new, cleaner-burning buses.

Today, however, environmental concerns are surely much less a factor than they were when the study was conducted in February. Going forward, people will more likely choose to leave their cars in the garage to avoid the soaring price of fuel. Over the past year, the price of diesel has shot up by more than a third to 97.27p per litre. Petrol has risen by more than a fifth. The increases have been most acute in the past few months thanks to the soaring oil price.

According to the AA, the spike in prices means that UK motorists are paying £14.4m more per day on petrol than they were 12 months ago. "The £6-gallon would have been an unrealistic nightmare to motorists only one year ago, yet today it is a reality," said Edmund King, president of the AA. "Two thirds of motorists have already cut back on their journeys and many are slowing down to conserve fuel."

Consider, for example, that at these levels it would cost an eye-watering £264 to fill the 44-gallon tank of the Ford Excursion, one of the largest sports-utility vehicles on the road.

Not surprisingly, car use has begun to drop markedly, according to recent Office of National Statistics figures. "Car traffic in the UK has fallen year-on-year in each of the past four quarters ... At no time in the past 14 years has there been this sort of sustained fall," said Gerald Khoo, an analyst at Credit Suisse.

There are other motivations at play too. "Factors such as worsening road congestion and more expensive parking costs are resulting in people switching from cars to trains and buses," Mr Khoo said. "Improved public transport services [new trains and buses, more reliable and punctual operations] and heightened environmental concerns may also be adding to the trend."

Stagecoach, along with rival Go-Ahead Group, are Credit Suisse' favourites to benefit from great numbers of people choosing to leave their cars home. Indeed, Stagecoach is particularly well-placed because nearly all of its petrol contracts are hedged, or fixed on long-term contrast well-below the market price, for the rest of this year.

Brian Souter, chief executive, said the oil price will continue to "focus people's attention" on alternatives. He said: "We are starting to see a fundamental shift towards public transport. We believe there is significant opportunity to attract more people to greener, smarter travel to help them reduce their carbon footprint and tackle climate change."