Sunday 22nd March 2020
There’s no doubt bus and train companies are going to run out of cash pretty soon; it’ll vary depending on the strength of balance sheets and how much cash is available in bank accounts. For some small coach companies it’s probably already too late although many can now opt for the ‘business in deep freeze’ option with Rishi’s 80% wage deal but for others, large (including PLCs) and small, as explained in yesterday’s post, some semblance of ‘essential service’ has to be maintained and therein lies the problem – how to keep that going with virtually no revenue coming in. What little revenue there is will have dried up almost completely by next weekend as the ‘don’t travel’ message finally sinks in with everyone.
Reader warning: I’m about to use the ‘N’ word.
I’ve come round to thinking the only way forward is immediate part nationalisation of the bus and train industry.
We’re already almost there in the train sector with Network Rail, an expanding Operator of Last Resort and DfT exercising hands on control. We all know a Train Operating Company can’t even sneeze (into a hanky and bin it, of course) without DfT’s micromanaging permission.
The Government’s continued prevarication over the Williams Review means it’s now too late for whatever that recommended; companies running franchises are haemorrhaging cash and no doubt next week are going to be claiming the jolly old ‘force majeure’ clause to bring things to a head.
In the short term public ownership can be achieved by simply renegotiating the franchises into management contracts before setting up a British Rail run by senior career rail managers who can take back control as the management contracts expire in the medium term.
In the post apocalypse they’ll be able to take sensible decisions on what investment makes sense for the brave new railway world as I can’t see the £100 billion price tag HS2 going ahead in what will become known as the Great Depression of the 2020s.
On the buses the Government needs to take bail out shares in the PLCs rather like happened when it rescued the Royal Bank of Scotland and Lloyds Bank to keep them afloat in 2008 (that’ll also help with Go-Ahead and First’s rail involvement too). Non listed smaller bus companies like trentbarton, McGills, Safeguard, Ensign, Stephensons, Compass Travel, Midland Classic, West Coast Motors … it’s a long list … could opt to be bought out by Government on a fair value asset and (normal trading) goodwill basis or if they have strong balance sheets and plenty of cash, which they don’t mind altruistically spending on keeping their company ticking over for the next year, they could carry on ploughing an independent furrow, albeit in a barren transport land.
DB owned Arriva and Transdev could be offered a similar buy out for their British bus (and Arriva’s) and train interests.
Right now bus franchising seems an even more inappropriate way to be running buses. You need fleet-of-foot decision making by people who understand buses in times of a fast changing crisis but evidence shows local authority led franchising means sluggish, almost comatose, non decision taking, witness the current trajectory of Transport for Cornwall pushing ahead with enhanced rural services for introduction next weekend (see a comment posted below yesterday’s post) or TfL enhancing back street bus route 404 in Coulsdon yesterday with a trebling of its vehicle commitment from a 1 PVR hourly service to a 3 PVR half-hourly route. Totally crazy timing.
In the great bus franchising and regulation debate over the last decade I’ve resolutely followed the line it’s not about ownership or regulation it’s about working together in partnership to tackle congestion. Because it has been; and was. But that was then; this is now. The world has changed. Bus companies will soon be on the brink of collapse. Congestion has disappeared completely. It is now all about ownership and survival.
This would be a short term plan; and as with trains, when we all tentatively begin to travel again once ‘Covid Is Done’, probably some time in 2021, the next step can be taken to merge the ownership of First, Go-Ahead, National Express, Rotala and Stagecoach to form a new National Bus Company (and Scottish Bus Group combined) run by seasoned and well experienced entrepreneurial bus managers on behalf of the Government’s shareholding and those remaining private shareholders still with a stake.
Gradually the Government’s stake could reduce, but I would like to see their involvement as minority shareholders continue. It will be the ultimate ‘public private partnership’ and a great basis to rebuild public transport fitting for a Country that hopefully by next year, having experienced the shock of unpreparedness for a pandemic experts had predicted would definitely hit us one day, will be serious about resolutely tackling climate change and the critical role buses and trains must play in breaking our habit of being wedded to car ownership and use.
I never thought I’d be promoting the idea of ‘nationalisation’ of our industry having seen how dynamic and innovative private enterprise has been over the last 34 years in the bus sector but ‘we are where we are’ (as they say) thanks to Covid-19. The National Bus Company was a fantastic business to work for with some brilliant directors and managers (some not so good, admittedly). It was only held back being forced to continually fund its commencing capital debt and being reliant on the Government’s annual capital investment policy diktats meaning not enough nor the right buses were always purchased when needed.
We can learn from that in NBC Mark 2 and most of all avoid that crucial mistake of doing away with much loved local liveries and identities; not that that seems important just at the moment, but just saying!
Right; back to some reading. Good luck everyone working hard to keep buses, coaches and trains running out there next week. It won’t be easy.
Roger French
BusAndTrainUser 
I can see some logic in this approach and some additional benefit as well. One of the major funding issues on rural bus service is the provision of services mainly used by ENC pass holders. If the buses were to be bought back under some sort of National control, the problem of lack of LA funding could be reduced through a national scheme rather than the use of LA’s?
As for rail companies another major problem is the complex relationship twix TOC’s; OAO’s: ROSCO’s; NTB’s: NR (Track/station Access costs) and the FOC’s – it would take some very complex algorithm to sort out the money go round in that lot!
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While public transport is a necessity in many cities, and poorly represented in the countryside,getting people back on the buses and trains is urgent,as more and more people get laid off, they will not have the income to support a car, so nows the chance for bus and train companies to reduce their fares issue payment cards to all, and the rest of the fare being paid by the state, eg topping up the payment, stoppinmg all buissness rates, killing off all vat on public transport and fuel for public transport, will help fund the above.
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There is no VAT on public transport or fuel for it – the same as it is for agricultural industries.
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I too can see some logic in the BR nationalisation argument . . . . it seems that (and this is from elsewhere) LNER, freed from the need to make premium payments to the Treasury, is able to get on with simply running trains. I suspect that Northern will be in the same position when the Covid-19 situation resolves itself . . . . as may SWR and TPEx.
Is part of our troubles with the current rail industry that too much time is spent on the “big picture” and reporting to the Stock Exchange, and not enough time spent resolving the small issues . . . . fix a lot of small problems, and the big problem will resolve itself? For example . . . . reduce the number of trains through the Castlefield Corridor, but run longer trains (combine them midway along the route, perhaps?); yes, longer journey times, a reduced frequency at some stations, but reliable journey times, which most passengers seem to prefer!!
Concerning the buses . . . . as long as the LTA’s and the DfT are kept at arms length (or maybe even further), then perhaps some amalgamation of operators might be beneficial. For a start, remove the Competition Commission from the picture . . . . if I want to co-ordinate timings on a route with another route operated by another company, I can’t talk directly to them!! I can’t co-ordinate fares to benefit passengers; I can’t agree joint season tickets without involving the LTA . . . . if this situation is to have any eventual benefit, then that’d be a good start.
Some form of “area” bus operators might work, although in many areas we’re down to just the one operator anyway, Perhaps we need to go back to the old “joint area” operations; the Southend’s, the Brighton’s, the Portsmouth’s, the Bournemouth’s . . . . whereby companies stayed individual, but co-ordination of timetables and fares was the name of the game. Indeed, the current “Oxford” model is probably the best such around. There’s probably enough old-un’s still around to advise the young’un’s . . . . . fancy becoming a “how it used to be done” advisor, Roger??!!
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Dear Roger,
Go back to riding on buses and trains, or find yourself a good book – PLEASE.
Nationalisation NO WAY. A prehistoric sloth like megalith.With one type of double decker (the awful Olympian) and one type of single deck buses ? No thanks.
To-day`s independents and large businesses are a breath of fresh air, innovative routes, creatively designed buses, gorgeous liveries, real time information and much more. All of which make our hobby interesting and exciting.
Agreed, that the companies need financial assistance to see them thru these troubled times, and financial support to bring back the rural services to their former glory. O to ride the 119/122 from Gravesend to Brighton. And other missed and long forgotten routes.
No sure this clog is bot a “wind-up”
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An interesting, thought provoking article.
Even before COVID-19 made its way to the UK, its clear the bus and coach industry has been in trouble. Small operators going to the wall, through losing local authority contracts owing to austerity or finding rising costs making their operations unviable. The Wrightbus saga. DB trying to offload the Arriva operation, which has resulted in little investment in Arriva Bus UK and a declining, moribund business. Plus First, which is a mess of rail franchises that are struggling, declining bus operations that are managed remotely and with shareholders wanting out.
This crisis, even when it is over now puts a whole industry, thousands of jobs and services people need at risk.
We must remember buses and trains are “essential services”. They are vital resources in a national emergency such as the one we are facing. Prior to Corona Virus, if a major transport group such as National Express or First looked like it was heading into administration, I imagine there would have been an attempt to engineer a merger to keep the show on the road, rather like that which took place between Lloyds and HBOS in the 2008 financial crash. In this, everyone is in trouble.
But, I don’t think we want a return to the days of the National Bus Company with its managed decline and its directions to local managers to paint buses in poppy red or leaf green. Or the old PTE operations with buses being used as a political football by local councillors, with the added bother of the new elected elected Mayors (especially at election time).
If you are going to put a stake into the transport industry, you introduce a Transport Bill with three parts.
The first part recreates NBC’s predecessor, the Transport Holding Company. THG Mark 2 can buy up to 55% of the shareholding in the “designated groups”, i.e. First, National Express, Go-Ahead, Arriva, Stagecoach, Transdev, Wellglade and Rotala The Secretary of State is given the power to buy or sell stakes, (so when the current situation calms down the stake can be diluted or sold), but only after the 31st December 2021.
The second part directs “where the THG holds a majority shareholding a “designated group or groups” with bus operation(s)in an “Integrated Transport Authority” area the “designated groups”, no later than the 31st March 2021 be required to:
1. Move these operations to a separate subsidiary for each ITA area, to be 100% owned by THG;
2. Where it is “economic, efficient and necessary to secure the operation of a viable network for a local area” direct that the THG merge the operations of the designated groups in respect of that ITA area, for example merging the NXWM and Diamond West Midlands operations together, or Stagecoach South Yorkshire and First South Yorkshire.
3. On the 7th April 2021, transfer such holdings to a company “wholly owned by the local authority pension fund for the area concerned, with an Employee Share Ownership Plan…..”
Why would you do that? Well it puts bus operations in cities like Birmingham, Manchester, Leeds and Sheffield under local control, but with companies owned by the council pension fund and the operators employees, The pension fund has to generate a return (by law) for their pensioners, such as retired social workers, refuse collectors, dinner ladies, probation officers, lecturers etc. in order to pay pension – which they do through investing in businesses. Which means, you have successful, commercial growing businesses in order to generate said return for the pension fund and the ESOP. Which focuses the mind of bus company managers, but also the local politicians. If you get it right, you have a successful business that you can get people to invest in and dilute the council pension fund holding and ESOP, and run locally for the benefit of the local community. Get it wrong, you have the electors, staff and council pensioners on your back….
The third part should support smaller and independent operators. It needs to prohibit “operators owned by the THG, or from the 7th April 2021 any operator owned by a local authority pension fund” from tendering for any socially necessary services deemed necessary to be provided by a local authority under the Transport Act 1985”. It should allow grants to be provided for local bus services operated solely by them to cover staffing and insurance costs until such date as directed by the Secretary of State.
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Fascinating – many thanks for these very interesting thoughts.
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If we are going to ‘nationalise’, invest in or consolidate bus groups, could there not be an opportunity to encourage greater integration with the railways? This integration could be in the sense of a single business, but definitely in the sense of transport integration. Either the large TOCs could invest in bus companies (where they aren’t already), or the ‘price’ for state investment could be greater transport integration. Timetables could be better aligned, through tickets purchased, joint marketing / advertising of services etc, all of which should encourage new passengers once this crisis is over, who may no longer have the financial backing to buy their own cars etc.
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Certainly an interesting train of thought Roger. We are only really two weeks into this and already, it is consuming management teams. The (heroic) efforts to reschedule networks might be in vain as they were done to cope with last week’s issues.
The daily change in circumstances is practically impossible to keep up with, and I would rank our business (McGill’s) amongst the fastest out there.
A shut down now seems inevitable for a period but sooner or later, a public transport system is going to be needed. With all of the other priorities government has, the undoubtedly quickest way to safeguard this has to be a level of realistic government support to start running services.
A business could theoretically lay off and close down. With employees getting by for three months on the 80%, the business may not fare so well. At some point, HP and other debt would need paid and eventually, even the strongest balance sheet would bleed dry – as you outline. To negotiate, agree and implement a nationwide takeover would take too long. 12 months at breakneck speed even if there was the money. And then….the same issue of support to get the businesses and networks back on their feet.
I can understand the thinking behind it, I occasionally have them also, but not on this occasion I don’t think.
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If HMG has to provide lots of money to industries, why not do it by buying shares?
Then gradually sell them on the open market as times get better?. Like with the banks
If they made loans these would be a burden on companies when recalled
But apart from monitoring to avoid any unlikely sharp practice , le the bus companies get on with it
I think this waters down the shareholders value now but it could recover later
Happy to hear if htis could work and whathe technicalities are.
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Some very interesting and valid comments here. But the one certainty is that both rail and bus will need a lot of support, but please, please not a full return to the horrors of the NBC and BR. Indeed they employed many people with vast talent, and one of the dire mistakes made at privatisation of both industries was dismissing many of those who knew best. But the moment Politicians and HM Treasury hold the keys to power, whoever is running the show is rendered powerless. Mark you, I almost yearn for the “poppy” red and leaf green when looking at the new Stagecoach livery!! One cannot blame the government for trying to “cheer us up” when indicating the present crisis may merely be a twelve-week hiccup, when they know it is likely to be a twelve-fifteen month disaster, or longer should a vaccine not have been found. It would be irresponsible to promote such doom and gloom, and the fact that simply nobody knows how this will all turn out other than as an economic disaster for most countries. There will indeed be strange times ahead, and the hope that car “worship”, and air travel for that matter, may diminish is overly optimistic. Most of the people I know would rather starve than give up either. But circumstances may dictate they have little choice (one hopes), and at least the climate change problem would be solved at a stroke and the angry little scowl of Miss Thunberg no longer seen (one also hopes). A third entry on the “wish list” would be to bury the HS2 project, as surely to proceed with that becomes unthinkable when the UK will be drowning in debt. And buses? They will survive, but probably in reduced form as the reasons people use them may no longer be there, thus the original premise of nationalisation becomes reality. We live in interesting times.
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I doubt that the Scottish buses would be incorporated if a new NBC was created as Britishness is a desolving state of mind these days despite the steady stream of royal babies whenever there’s trouble.even under the NBC , Scotland and Northern Ireland had their own national bus companies.although Eastern Scottish,later Lowland,did have a depot in England at Berwick upon Tweed which it shared with United.for some reason Wales was covered by the English NBC subsidiaries and some of it’s own.the Scottish already seem displeased with their fellow British heading north from the section know as England to seek refuge from corvid-19 in the Highlands and Islands obviously oblivious to the fact that they are taking corvid-19 on a holiday north to a place with little medical infrastructure and perhaps the locals might have even less immunity in remote locations.cal Mac and Northlink ferries are now shut to non natives.
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The logic of today’s decision to suspend rail franchises was clear; the argument for re-nationalising bus networks much less so, at least until government (or the local transport authorities) put their head above the parapet and determine what an “essential public service” network actually looks like. It’s a task that local authorities went through in a more relaxed environment prior to deregulation in 1986 – but in this rapidly moving environment, it is crucial that LTAs set out their strategy for maintaining priority services if operators are forced to cut back or cease operations. It may be a skeletal network; it may look nothing like today’s network, but if an operator cannot sustain its operation, then LTAs should be in a position to step in with a ‘minimum’ service level that can then be procured (at no financial risk to the operator) either from the incumbent or another operator. Unlike the railways, we seem to have no ‘safety net’ to guarantee bus services.
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Once again the two-tier nature of our public transport is shown in stark relief, with bus users once again – despite being multiple times more in numbers – being ignored as the poor relations.
The current Transport Secretary Grant Shapps is an improvement on his predecessor Failing Grayling – but to honest that would not have been hard. However he very much wears his credentials as a rail commuter from the Home Counties on his sleeve (he is also the MP for the Hertfordshire Constituency of Welwyn Hatfield) and is such is typical of a large proportion of the rail user demographic – better-off, white middle-aged men. During the coronavirus he has acted swiftly to engage the rail industry and assure its future, culminating this morning in the very conversion of the Train Operating Company franchises to management contracts that you suggested in your article.
If buses feature on Grant Shapps’ radar, it may well be a vague awareness of the variety of colours and operators as he proceeds on his business around the constituency. I wonder if he is aware that Hertfordshire County Council is one of the more progressive when it comes to public transport policy and seeks to work in partnership with rail and bus operators in the company under its co-ordinated “Intalink” banner? Work that has of late become compromised with the continuous savage cutting of Local Authority funding. I wonder if he ever thinks about the typical bus users – the elderly, students, the less well-off – and of course the many thousands of workers whose low-paid jobs have now been deemed as “essential”? I suspect not, because despite having secured the integrity of the UK’s rail network, he does not appear to have lifted a finger or provided a single Treasury penny to prevent the collapse of the UK’s bus industry,.
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@ busboybrian –
In one sentence you write off the NBC as “A prehistoric sloth like megalith”
In another you write: “O to ride the 119/122 from Gravesend to Brighton.” A route that would be almost totally irrelevant to most of today’s travel requirements even in normal circumstances.
You can’t have it both ways.
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Whilst thoroughly agreeing with the comments made regarding Transport Secretary Shapps, and indeed approving of his actions, it is so much easier for the government to deal swiftly with the franchised rail companies as opposed to commercially operated bus services over which they have no direct control. Working in both industries, I was astonished when switching from bus to BR at the attitudes shown towards buses by “superior” Railmen and Users (staff and passengers). A mere suggestion that their train had been replaced by (an often luxury) coach was frequently met with direct abuse. Incredulous comments such as “Why were we not told?” were made (how do you answer that one?). On many occasions demands were made for taxis to avoid actually getting on a bus, and to suggest it would probably be easier to make their journey by local bus at times, met with horrified stares of hostility. And when grappling with planning rail replacement services during the WCML modernisation, I found much the same peculiar attitude from the most TOC Managers. There was simply no understanding of the simplicity/flexibility of replacement services, many of which were grossly over-bussed and over-timed on the laughable premise that trains all ran “at line speed” and therefore replacement buses had to be operated on the assumption of worst traffic conditions. They simply could not comprehend the difference because on not one occasion in four years did I ever see a Manager from either Network Rail or a TOC actually use a replacement “bus” (it was always called a “bus” although invariably a coach). Thus the “Movers and Shakers” who pull all the strings in the UK have little understanding of just how brilliant a bus can be in times of trouble. As a Conductor, I once loaded thirty standing passengers on an RF (route 227) twixt Shortlands and Beckenham Junction after a train had been sent down the wrong line, with me standing on the steps to stop anyone falling off. They liked buses that night! But I am sure someone at the DfT may remind Minister Shapps (an Airline enthusiast I believe God Help Us), that “transport” does include the humble bus, and it will not be allowed to disappear in the financial collapse we shall surely see quite soon.
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I’d really like to see well funded integrated bus and train networks along the lines of the German verkehrsverbund’s. If they can do it why can’t we?
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