High

Land Passenger Transport

As the economy recovers, rebuilding passenger confidence and usage will be critical in re-establishing sustainable operations.

Sector trends & challenges

  • Impact of lockdown measures

    Lockdown measures, social distancing and low public confidence have substantially reduced passenger loads. Rebuilding passenger confidence will be essential to the sector’s recovery.

  • Financial support

    Ongoing financial support has been critical for operators in maintaining essential services. Within the rail industry, this is being allied with a fundamental change in the franchising model.

  • Long-term trends and liquidity

    Even after restrictions end and confidence returns, reduced commuting may hinder the extent to which demand returns to historic norms.

Sector rating profile

Bus usage has been falling for several years, resulting in margin pressure – particularly for regional operators outside London where there is an unregulated structure. However, the core bus businesses of major transport operators remain strong and profitable. UK Rail has experienced significant stress and distress, with a number of franchises terminated by the Department for Transport. Fundamental changes in the franchising system are currently underway which are likely to de-risk rail operations through management contracts, with central government assuming revenue risk.

Land passenger transport

During the COVID-19 pandemic, the fortunes of the sector have varied significantly depending on both the mode of transport and location. Whilst rail and London bus operators have been relatively insulated from the downturn in passenger volumes, regional bus operations have been reliant upon direct Government support.

Ongoing financial support is critical in order to help businesses within the sector to navigate this difficult period. Reduced demand is impacting regional bus operators; however, London operators are insulated from revenue risk through their TfL contracts. Emergency Recovery Management Arrangements (ERMAs) were introduced in September 2020 and are providing an effective support mechanism for rail operators.

The sector will need to be agile to adapt to demand whilst continuing to provide a much-needed public service. Managing costs whilst continuing to invest in new technologies, such as hybrid, electric or hydrogen vehicles, will be critical in meeting environmental regulations.

Over the long-term, we’re confident that demand for public transport will return – albeit, whether it returns to historic norms will be largely dependent upon the shape of future working and the extent to which homeworking replaces the daily commute.

Find Your Expert

David Pike is Interpath Lead for the Transport & Logistics sector, which includes Land Passenger Transport as one of four core segments. Peter Burnett leads our approach to Land Passenger Transport nationally for Interpath. For a full list of our senior people with experience in the sector use the button below.

Our senior team