HS2

ORR: Siemens-Alstom merger could have ‘detrimental impact’ on UK rail market

The rail regulator claims that a merger between rail manufacturing giants Siemens and Alstom could have a “significant detrimental impact” on competition in important British rail markets.

The ORR welcomed the European Commission’s decision to open an in-depth investigation into the possible merger of the two companies, saying it would “engage closely” with it to ensure that Britain’s public interest is taken into account.

A potential merger between Siemens and Alstom, two important players in the rail supply chain, particularly for signalling and rolling stock, would result in the companies controlling around 75% of the British rail signalling market.

For some specific elements of signalling, such as interlocking, their share is likely to be even higher: the ORR estimates that a merger could increase costs by tens of millions of pounds each year because of reduced competition. This would add costs to Network Rail, which buys these services and is funded by passengers and taxpayers.

“ORR is concerned that if the merger were to go ahead, the combined business would become extremely powerful, and that competition in Great British markets would be significantly reduced, potentially adding significant costs to the detriment of passengers and taxpayers,” the regulator noted.

Chief executive at the ORR Joanna Whittington added: “Competition in the supply chains which support Great Britain’s railway is essential if passengers and taxpayers are to receive a high-quality service at an efficient cost.

“We are concerned that the proposed merger of Siemens and Alstom will significantly reduce competition, leading to increased costs in Britain’s railway signalling and rolling stock markets. That is why we are setting out strong arguments to the European Commission and pressing for significant structural remedies to ensure competition in key railway supply chains is protected.”

The ORR noted that the merger would reduce the number of potential bidders for new rolling stock manufacture contracts.

In the recent HS2 train tender, valued at £2.75bn, Alstom and Siemens were amongst two of five companies bidding for the contract. The loss of competition could as “significant costs” to the detriment of the travelling public, the ORR noted.

Last month up to 200 jobs were put at risk in Alstom Pendolino cuts.

Enjoying RTM? Subscribe here to receive our weekly news updates or click here to receive a copy of the magazine!