Moderate

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. As vaccination programmes mature and restrictions are lifted it is anticipated the sector will rebound, albeit the speed and extent of any recovery remains unclear.

  • Financial support

    Ongoing financial support has been critical for Bus operators in maintaining essential services. Within the Rail industry there have been fundamental changes made to the franchising model.

  • Long term trends and strategy

    A longer-term trend of reduced commuting provides an opportunity for management to make long-term strategic decisions, such as non-core divestment, horizontal/vertical integration, and formation of partnerships.

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. Further government measures to support public transport and reduce car usage will be a net positive.

 

UK Rail has experienced significant stress and distress, with a number of franchises terminated by the DfT. Fundamental changes in the franchising system have been implemented which de-risk rail operations through management contracts, albeit at the expense of level of return. Further consolidation and withdrawals from this sector are likely.

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 (London bus operators were protected from revenue risk through their TfL contracts, whilst rail operators benefitted from Emergency Recovery Management Arrangements), regional bus operations were reliant upon direct Government support.

Bus passenger volumes are now returning strongly across the UK – significantly ahead of the levels seen in rail.

As the economy recovers from the COVID-19 shock further government support, particularly in the English regions, is likely in terms of promoting bus use over private vehicles – the DfT has recently published a strategy document setting out a vision for delivering better bus services for passengers across England. Funding is also available for local authorities to trial on-demand bus services.

The bus 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 (i.e. the extent to which homeworking replaces the daily commute). Either way it is going to be an exciting period of change and development across the sector.

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