Lack of competition on the buses

The bus industry is to face its most radical shake-up since privatisation 25 years ago, after the Competition Commission found deregulation had left passengers suffering from poor services and higher fares.

The watchdog reported bus operators "face little or no competition" in some areas of the country. Its inquiry did not take in London, where the market is regulated.

However, throughout the rest of the UK there are about 1,250 bus companies but the five largest — German-owned Arriva, and its listed rivals FirstGroup, Go-Ahead, National Express and Stagecoach — carry 70 per cent of passengers.

Jeremy Peat, who is chairing the commission's investigation, said: "In too many areas of the country, competition has stagnated and the incumbent providers know that they face little in the way of serious challenge. The incentive to increase services, innovate and even lower fares is absent."

The watchdog's proposals to open up the market include boosting the number of multi-operator ticket schemes and banning "over-bussing", where operators increase frequency to knock out competitors.