The Competition and Markets Authority (CMA) has provisionally concluded that the proposed €1.7 billion Thales’ Ground Transportation (GTS) and Hitachi Rail merger could hurt the industry.
The initial report from CMA stated that competition within the digital mainline and urban signalling industry would be damaged. Both Network Rail and Transport for London (TfL) are expected to begin replacing signalling systems over the coming years, with Network Rail currently planning to upgrade much of the rail signalling systems over the next decade, utilising digital technologies.
However, the CMA considered that both Thales and Hitachi are active competitors in the industry, two of the biggest and should the merger go ahead, it would significantly reduce the number of credible bidders for digital signalling tenders. The CMA also raised concerns that the lack of competition would increase costs for Network Rail and negatively impact their digitalisation projects.
UK railway networks spend millions of pounds each year maintaining and upgrading signalling systems which ensure transport networks run smoothly and passengers remain safe. Healthy competition in this market is essential to support innovation as well as to keep costs down.
Stuart McIntosh, chair of the independent Inquiry Group, said: “We have provisionally found that, should the merger go ahead, it would reduce the number of signalling suppliers in what is already a highly concentrated industry, and the resulting loss of competition could leave transport networks and passengers worse off.
“We will now consult on our findings and on how Hitachi and Thales might address our concerns, in a way that protects passengers and delivers the government’s objective for a more reliable, efficient and modern railway.”
Traditionally, Network Rail has used either Siemens or Alstom for main signalling projects however after recommendations from the Office of Rail and Road (ORR) to increase the number of suppliers for mainline signalling projects, Network Rail are currently working on the Train Control Systems Framework (TCSF) to implement those recommendations.
The CMA will consult with Hitachi Rail and GTS on how both companies will address the authority’s concerns.
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