Business outlook: Prescott to set pace for rail and bus firms

transport

The most important event of the year for Britain's road, rail, air and sea industries will be the publication in May by John Prescott, the Deputy Prime Minister, of the Government's integrated transport policy.

The accompanying white paper will almost certainly herald new measures aimed at curbing car use, such as road pricing and heavier taxation of company car perks like free parking. The moves could benefit the expanding bus and train transport groups such as Stagecoach, FirstBus, National Express Group and Go-Ahead.

However, the flip side for businesses such as these could be much tighter regulation of their bus and rail activities. The Government has already hinted that it would like to bring the train leasing companies such as Porterbrook under the umbrella of the existing rail regulatory framework. There is also the possibility of the bus industry outside London being brought under direct regulator control.

Another issue likely to be on the agenda is the ownership of London Underground, which Railtrack would very much like to get its hands on.

The big City event of the year will be the flotation of London and Continental Railways, the consortium selected to build and operate the high-speed Channel Tunnel rail link. LCR is seeking to raise pounds 5.4bn, of which pounds 1bn- pounds 1.5bn will be through an equity issue around the middle of the year. Given the experience of the tunnel itself - two years late and 100 per cent over budget - it will not be an easy issue to get away.

With the ferry merger between P&O and Stena Sealink now finally approved, a move which should mean improved efficiency and more stable pricing, 1998 might just be the year when Eurotunnel begins to make real operating profits before, of course, interest on its debt mountain. Although the debt has been halved, it still stands at pounds 4bn.

Another merger which should finally see the light of day is the British Airways-American Airlines alliance, held up by regulatory investigations for 18 months. Assuming it finally gets clearance from Brussels and Washington in February, expect to see the alliance start up in the autumn with the two carriers shorn of perhaps 250 take-off and landing slots at Heathrow.

- Michael Harrison