Rail passengers face cuts to services and higher prices after talks between the Government and rail chiefs over the prospect of the first fall in passenger numbers for 15 years.
Geoff Hoon, the Transport Secretary, met the "big five" operators, Stagecoach, National Express, Go-Ahead, Arriva and FirstGroup, amid fears they will have to reduce service commitments to cope during the recession.
Figures to be released soon by the rail industry will show that past year saw the first slowdown in passenger growth in six years.
Since the start of 2009, significant numbers of jobs have been lost, which will directly hit commuter numbers travelling to major cities.
Most rail companies are tied into tough franchise contracts with the Government which were agreed during the boom years and assumed continued growth in passenger numbers.
Several companies have already shed jobs and instituted wide-ranging internal restructuring to cut costs, but a slump in passenger numbers has led to a real fear of cuts to services.
One industry insider said: "There is historic evidence to suggest a retraction in demand in certain areas is on the cards this year. If that happens, companies will have to go back to the Government to discuss a change to their franchise agreements."
Last night, analysts raised concerns over the East Coast Main Line services run by National Express. The company paid £1.4bn for the franchise last year. "The franchise was one of the most recent sold and the company has said already it needs 10 per cent revenue growth to meet targets," said Gert Zonneveld, analyst at Panmure Gordon.
Both the rail operators and the Government last night refused to comment on their discussions. But the meeting came after senior figures in the rail industry admitted that they may have to renegotiate the terms of franchise deals agreed long before the downturn. Keith Ludeman, chief executive of Go-Ahead, said: "There is nothing to stop us, if demand falls, going to the department and asking to take services out."
A DfT spokesman said: "This was one of a regular series of pre-planned meetings the Secretary of State holds with train operating companies. A range of issues was discussed, including the fact that passengers and operating companies are facing uncertain economic times. The companies said passenger numbers were still growing but they would monitor the situation closely. The train operating companies did not propose any cuts in services."
Industry sources said that companies are looking to boost online ticket sales and increase use of automatic ticket machines to reduce costs. The moves could see ticket offices under renewed threat. "It is an area that companies are looking at as research suggests online and ticket machines are popular with customers," one said.
Unions also said they were concerned that cuts to services could be on the horizon and urged the Government to resist attempts from rail operators to change their franchise obligations.
Bob Crow, general secretary of the Rail Maritime and Transport union, said: "Revenues, profits and dividends have been rising steadily, but at the first hint of a slowdown they want to slash services and sack staff when that is the reverse of what the economy and environment need."
Gerry Doherty, leader of the Transport Salaried Staffs Association, said: "If the companies are allowed to cut services it can lead to more cattle truck conditions for passengers."
The Association of Train Operating Companies conceded that some operators may consider reducing train sizes, but said that the industry was fundamentally in good shape.
"If a major retailer announced growth of just under 5 per cent at a time like this, I think they would be pretty pleased," said a spokesman. "There is still growth in the industry."