Inquiry into local bus market 'may delay investment'

TRANSPORT groups have warned that a Competition Commission investigation into the bus sector could be destabilising and cut investment.

In August, the Office of Fair Trading said it planned to refer the local bus market – excluding London – to the commission for investigation, claiming a lack of competition may be pushing up prices for consumers.

Transport sources have said they expect the consumer watchdog to act on this decision in the coming weeks.

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Yesterday, Aberdeen-based FirstGroup warned that a full competition inquiry would be an "unnecessary distraction" at a time of regulatory change and tough trading conditions.

"We are only now coming to terms with new regulations of the Local Transport Act," the group said in a statement. A referral to the Competition Commission will only destabilise this regulatory regime and potentially delay further investment."

Stagecoach's finance director reportedly said that a referral to the Commission by the OFT would be "a nonsense", claiming the market outside London "is competitive and vibrant".

Royal Bank of Scotland analyst Joe Spooner said since the OFT's initial findings a referral to the commission had always been likely, but real action could be years away. "Ultimately, we are unsure whether there is sufficient political will to back change to the industry structure, if that were to be the final (Competition Commission] recommendation," he said.