Rolling stock

01.05.07

Leasing of rolling stock for franchised passenger services referred to the Competition Commission

The Office of Rail Regulation has announced its decision to refer the leasing of rolling stock for franchised passenger services to the Competition Commission for further investigation.

The decision follows a full public consultation on ORR’s competition assessment and the draft market reference. Following careful consideration of consultation responses, ORR believes that certain market features are limiting competition and have the potential to lead to higher prices and a poorer quality of service than would otherwise be the case in a more competitive environment.
The key issue is a lack of liquidity in the market. This arises from features that are both inherent and as a result of the way in which the franchising process impacts on the market.

ORR believes that a reference to the CC is an appropriate and proportionate response in the light of the competition concerns it has identified, especially given the size and importance of these markets to the UK rail industry and the powers available to the CC to effect any remedy.

Chris Bolt, chairman of ORR, said:
"Rolling stock leasing is a significant part of train operating costs – around £1billion a year. Our review of these markets has identified features that appear to us to prevent, restrict or distort competition – the test for a reference to the Competition Commission. This means that train operating companies may be paying higher prices and/or receiving a poorer quality of service than if competition was more effective.

"A thorough review of the issues by the CC is likely to result in more certainty and stability for all parties in the future, allowing them to plan their businesses with a greater degree of assurance than currently. It is important, going forwards that the relationship between all stakeholders is built on a foundation of confidence that each party to the arrangements is securing value out of that relationship. It is clear to us that confidence is currently lacking."

Responding to the ORR’s decision, Haydn Abbott, managing director of Angel Trains, said: “Angel Trains has invested close to £3 billion in new trains for the UK in recent years, the largest level of train investment undertaken for decades by a single company. The UK can now comfortably boast the youngest fleet of trains in Europe, mainly because the ROSCOs have made the financial commitment they have.

“Angel Trains is confident that the Competition Commission will find the Department for Transport’s complaint unjustified. The ORR’s criticism of the rolling stock market concentrates on the failure of the structure of the franchising process which the DfT is responsible for.

As the ORR has stated in its conclusions, this reference has implications for the willingness of firms to supply new rolling stock. As such, we are concerned that essential investment in additional capacity to solve the evident overcrowding problems in Britain’s railways might be at risk.”

Tell us what you think – have your say below, or email us directly at opinion@railtechnologymagazine.com

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