NEXUS take-over ?

[Robertj21a]

Ok, so what do people think will really happen if NEXUS get their way up in Tyne & Wear following the decision due later this month ?

Will Brian Souter definitely pull Stagecoach out of the area as he has threatened ?

Will GoNorthern and Arriva just pick up the pieces and accept a lower overall return, from NEXUS ?

 

[317 forever]

I admit I forgot about Nexus' wish to go over to franchised bus services in Tyne & Wear. If Stagecoach do close their service in the area, I wonder whether rival franchisees could find the garage space to run replacement services?

 

[winston270twm]

I admit I forgot about Nexus' wish to go over to franchised bus services in Tyne & Wear. If Stagecoach do close their service in the area, I wonder whether rival franchisees could find the garage space to run replacement services?

I can't see Stagecoach being that stubborn that they would close their entire NE operation in protest, surely its only a threat, as Stagecoach will loose the 20% profit margins they are making from the former Busways Ops.

If they did carry out their threat, all the Stagecoach depots would be empty so garage space wouldn't be an issue.

 

[Robertj21a]

I can't see Stagecoach being that stubborn that they would close their entire NE operation in protest, surely its only a threat, as Stagecoach will loose the 20% profit margins they are making from the former Busways Ops.

If they did carry out their threat, all the Stagecoach depots would be empty so garage space wouldn't be an issue.

Souter is a tough cookie and not one to back down. Stagecoach will lose any large margins anyway under the Nexus plans. The depots are, presumably, owned by Stagecoach and I doubt that he would willingly sell them on for Nexus to use.

 

[ChathillMan]

It might be worth remembering that if the combined authority say yes to the NEXUS plans (they will) then nothing really happens anyway for months as it's needs to go to a government panel to see if the public interest tests have been met.

After that then the lawyers will get involved from the bus companies, it will be years before he scheme would even start, if it does at all.

 

[317 forever]

Souter is a tough cookie and not one to back down. Stagecoach will lose any large margins anyway under the Nexus plans. The depots are, presumably, owned by Stagecoach and I doubt that he would willingly sell them on for Nexus to use.

His threat was to dump the routes, make the staff redundant, reallocate the vehicles elsewhere within Stagecoach or dispose of them, and sell the depots for redevelopment. So yes, he could prevent their re-use by Nexus (unless a third party then sold them to Nexus, provided Nexus could fund their purchase?).

 

[Robertj21a]

.
Will NEXUS end up with a bottomless pot of money (from taxpayers) to help fund whatever they want to do ?

They're going to need a lot of money to buy their own depots - and, possibly, a lot of buses too.

 

[winston270twm]

Souter is a tough cookie and not one to back down. Stagecoach will lose any large margins anyway under the Nexus plans. The depots are, presumably, owned by Stagecoach and I doubt that he would willingly sell them on for Nexus to use.

Even so, Souter is threatening to pull the plug on a big bus subsidiary & put all the staff on the dole just because his profit margins will drop from 20%+ to a level which most London bus operators expect to earn if Nexus get their own way, nice bloke!

Nexus will always find someone else willing to operate the routes.

 

[ChathillMan]

Its a good question, a one they have not really answered . I have followed this story for quite a while and I think they overestimated the amount of profit they think the bus operators make. Go North East invested more money in buses than they took in profit last year, Stagecoach have froze fares this year.

Arriva are the only operator that won't really lose out if it goes ahead. They get to keep all the big profit making routes from Blyth and Ashington in to Newcastle as they are "out of scope". GNE AND stagecoach stand to 90% of routes.

 

[Busaholic]

Wouldn't First love to step in, taking on old Stagecoach routes as evidence that they are back from the brink and ready to invest serious money again? Or do they take the Stagecoach position too? Interesting the two groups co-operate in South Yorkshire, after great pressure (and some money) from the PTE.

 

[TheGrandWazoo]

Wouldn't First love to step in, taking on old Stagecoach routes as evidence that they are back from the brink and ready to invest serious money again? Or do they take the Stagecoach position too? Interesting the two groups co-operate in South Yorkshire, after great pressure (and some money) from the PTE.

No, they wouldn't. After all, if they helped Nexus on this one, where next? West Yorkshire, their single biggest profit centre?
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Even so, Souter is threatening to pull the plug on a big bus subsidiary & put all the staff on the dole just because his profit margins will drop from 20%+ to a level which most London bus operators expect to earn if Nexus get their own way, nice bloke!

Nexus will always find someone else willing to operate the routes.

Really Winston, I expected better of you.

Stagecoach UK bus averages 16% and clearly Busways and the other powerhouses like Manchester help that average. Take Busways and the other PTE areas to something nearer 10% then see what their overall figures are.

Also, you question the morality of him pulling out. If I remember correctly, Busways was sold to their employees via an ESOP, and the proceeds went where? The employees then sold out to Stagecoach (and pocketed many thousands each). Stagecoach paid up the company - why should it then be effectively removed without compensation?
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Its a good question, a one they have not really answered . I have followed this story for quite a while and I think they overestimated the amount of profit they think the bus operators make. Go North East invested more money in buses than they took in profit last year, Stagecoach have froze fares this year.

Arriva are the only operator that won't really lose out if it goes ahead. They get to keep all the big profit making routes from Blyth and Ashington in to Newcastle as they are "out of scope". GNE AND stagecoach stand to 90% of routes.

This is the nub of it. The Nexus position has been to say that they can deliver newer vehicles, more services, lower fares (but only for two thirds of passengers) and all by reducing the margin through franchising. However, this is all based on the headline figure of 20%+ of Busways and not the GNE margin. It's almost impossible to separate out ANE but as you say, the killer routes for them are the South Northumberland expresses NOT the North Tyneside routes.

Then you look at the expected margins that they expect to pay. Experience suggests a figure of 10% margin from franchised operations to fund investment and shareholder returns. Nexus have an unrealistic idea of current profit margins, unrealistic expectation of what franchising margins will be, and that doesn't account for the administration of the scheme.

The idea that squeezing the commercial operations to fund a raft of improvements with virtually no downsides seems almost too good to be true. To fund the types of improvements that we'd all like to see can only be done by firm commitments from the government, but I don't see the glory in it for them.

FWIW, I also agree that teams of lawyers will be lined up and you can see this being a long processs

 

[winston270twm]

Really Winston, I expected better of you.

Stagecoach UK bus averages 16% and clearly Busways and the other powerhouses like Manchester help that average. Take Busways and the other PTE areas to something nearer 10% then see what their overall figures are.

Also, you question the morality of him pulling out. If I remember correctly, Busways was sold to their employees via an ESOP, and the proceeds went where? The employees then sold out to Stagecoach (and pocketed many thousands each). Stagecoach paid up the company - why should it then be effectively removed without compensation?

TGW,

Taking your example in bold in to the equation, based on Souter's threat/if is carried out, Busways contribution to Stagecoach UK bus goes from 20%+ margins to nil. Stagecoach would have to right off the value of Busways in its accounts and also pay all the associated closure costs, I can't see the City being very happy with that prospect, especially given the current value/size of Busways.

Although I can appreciate Mr Souter isn't very happy at the prospect of loosing the well above average profit margins from of its bigger UK bus subsidiaries, threatening to close the entire business if the result doesn't go his way sounds very much 'cutting his nose off to spite his face'. I'm sure Stagecoach would be compensated in some shape of form / or by taking NEXUS to court for loss of profit.

 

[TheGrandWazoo]

But that's the point. The legislation doesn't provide for compensation and Nexus haven't the funds. In a speech by Mary Creagh, she actually says that she backs QCs but that no money will be made available as it's about control and not a funding commitment.

And if such a business can essentially be taken without compensation then what inherent value does it have?

 

[winston270twm]

But that's the point. The legislation doesn't provide for compensation and Nexus haven't the funds. In a speech by Mary Creagh, she actually says that she backs QCs but that no money will be made available as it's about control and not a funding commitment.

And if such a business can essentially be taken without compensation then what inherent value does it have?

TGW,

I totally agree with the point about compensation, when a PTE can just taken over commercial routes that are registered to Busways for example, effectively taking over the business. I said exactly the same when it was suggested that quality contracts should be introduced in the West Midlands by Centro and Centro should takeover control on NXWM's travelcard business.

The debate on here was more to do with Mr Souter's threat & if he carries them out, which in my opinion is OTT. Someone else will always fill Stagecoach's shoes in Newcastle & work for Nexus.

 

[radamfi]

I realise my view is widely disputed, and we have debated this to death, so I have been holding my tongue up to now, but I still say that as soon as Transport Act 2000 became law, that meant that any area could in theory have commercial services banned, so the 'business' undertaken by commercial bus operators should have been valueless at that point (other than tangible assets such as property and vehicles). Otherwise what's the point in making QCs law if they can't be implemented because they get overruled by another law?

I don't think we'll know for sure until it is tested in the courts. I still believe that Nexus will back out at the last moment and the whole point of the exercise is get the best possible partnership deal.

 

[Hophead]

Of course, Stagecoach could just sell the operation to the highest bidder - a merchant bank maybe, and buy it back for rather less a few years later.

 

[winston270twm]

Of course, Stagecoach could just sell the operation to the highest bidder - a merchant bank maybe, and buy it back for rather less a few years later.

Nice, idea. But I doubt it would achieve that higher price with the current uncertainty.

 

[ChathillMan]

IMO NEXUS should at least trial a partnership agreement for 5 years, if at the end of it the scheme has not improved passenger numbers/services then by all means go for QC.

IMO NEXUS should also allow customers travelling from outside Tyne and Wear the chance to buy Metro add on tickets for operator specific season tickets- which for some reason it doesn't want to.

 

[WatcherZero]

Im trying to remember wasnt there two boughts of legislation, one that created them but no one ever used them and one a couple of years ago which made them easier to implement but still Nexus is the only one pursuing because its like using pulling a gun, everyone runs screaming. Other places are doing the quality partnerships which if I remember right locks operators in to providing a certain quality of service for so many years if a certain amount of infrastructure on a route is new rather than existing.

 

[Tetchytyke]

His threat was to dump the routes, make the staff redundant, reallocate the vehicles elsewhere within Stagecoach or dispose of them, and sell the depots for redevelopment.

And he could do that.

Why would a new operator need to use the Busways depots though? Walkergate is mostly outdoor hard-standing, they basically just concreted over an old factory to build the depot. There are plenty of other old factories that can be concreted over.

The re-sale value of Walkergate would be tiny, nobody is going to build houses next to Heaton depot and a Siemens electrical substation. Slatyford might be a bit more promising as it is an area that house builders would want to build in.

I also don't see how or why Stagecoach plc would be entitled to compensation if the regulatory system in their business changes. Nexus would not be seizing their business, they would simply be changing the access arrangements for that business. Saying Stagecoach plc would be entitled to compensation is like saying Wonga should be entitled to compensation because excessive interest rates were outlawed.

If Stagecoach don't like the price being offered for the work that's too bad, but there are plenty of other companies who would like the price being offered. Souter's mostly throwing his toys out of his pram because his rampant profiteering in Tyneside- maximum profits, minimum investment- might get cut down to size.

That said, if quality contracts come in I'll eat my hat.

 

[duncanp]

Didn't the Scottish Government propose abolishing bus de-regulation in Scotland, but eventually this was dropped?

Sometime before the proposal was dropped, Mr Souter made a donation of about £500,000 to the SNP.

Any suggestion that these two events were connected is of course completely untrue

 

[winston270twm]

Im trying to remember wasnt there two boughts of legislation, one that created them but no one ever used them and one a couple of years ago which made them easier to implement but still Nexus is the only one pursuing because its like using pulling a gun, everyone runs screaming. Other places are doing the quality partnerships which if I remember right locks operators in to providing a certain quality of service for so many years if a certain amount of infrastructure on a route is new rather than existing.

Centro in the West Midlands had explored/threatened introducing quality contracts here, but have since formed a quality partnership with NX group's NXWM which is renewed approx every 2-3 years. The latest agreement to Autumn 2015 see's NX deliver 300 new buses over a 2 year period + more

http://www.centro.org.uk/about-us/n...o-sign-pound81m-deal-to-transform-bus-travel/
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And he could do that.

Why would a new operator need to use the Busways depots though? Walkergate is mostly outdoor hard-standing, they basically just concreted over an old factory to build the depot. There are plenty of other old factories that can be concreted over.

The re-sale value of Walkergate would be tiny, nobody is going to build houses next to Heaton depot and a Siemens electrical substation. Slatyford might be a bit more promising as it is an area that house builders would want to build in.

I also don't see how or why Stagecoach plc would be entitled to compensation if the regulatory system in their business changes. Nexus would not be seizing their business, they would simply be changing the access arrangements for that business. Saying Stagecoach plc would be entitled to compensation is like saying Wonga should be entitled to compensation because excessive interest rates were outlawed.

If Stagecoach don't like the price being offered for the work that's too bad, but there are plenty of other companies who would like the price being offered. Souter's mostly throwing his toys out of his pram because his rampant profiteering in Tyneside- maximum profits, minimum investment- might get cut down to size.

That said, if quality contracts come in I'll eat my hat.

Totally agree with the above statement, Busways doesn't get anywhere near the levels of new buses that Manchester does......

 

[TheGrandWazoo]

And he could do that.

Why would a new operator need to use the Busways depots though? Walkergate is mostly outdoor hard-standing, they basically just concreted over an old factory to build the depot. There are plenty of other old factories that can be concreted over.

The re-sale value of Walkergate would be tiny, nobody is going to build houses next to Heaton depot and a Siemens electrical substation. Slatyford might be a bit more promising as it is an area that house builders would want to build in.

I also don't see how or why Stagecoach plc would be entitled to compensation if the regulatory system in their business changes. Nexus would not be seizing their business, they would simply be changing the access arrangements for that business. Saying Stagecoach plc would be entitled to compensation is like saying Wonga should be entitled to compensation because excessive interest rates were outlawed.

If Stagecoach don't like the price being offered for the work that's too bad, but there are plenty of other companies who would like the price being offered. Souter's mostly throwing his toys out of his pram because his rampant profiteering in Tyneside- maximum profits, minimum investment- might get cut down to size.

That said, if quality contracts come in I'll eat my hat.

I agree that QC's won't come in. I think there's some scaremongering and also, will Nexus really want to spend the money on legal fees because that is what Stagecoach and the others will do.

Likewise, the situation with the depots.... Slatyford could easily be developed for housing, and Walkergate is just a large yard as you say. S Shields has a nice corner site so ideal for retail development. Only Sunderland is not obvious but these sites can always be developed.

I know you don't like Stagecoach, but the idea of minimal investment is just wrong. The list below (Jan 2014) shows that Busways is mid table but that doesn't reflect the large number of new single decks that have arrived this year. The oldest deckers are 2007 vintage. Yes, there was reduced investment in 2001-4 when Stagecoach had their American troubles but in T&W, investment has been very strong in the last 7/8 years

• Oxfordshire 3-years, 11-months
• Western 5-years, 7-months
• Midlands 6-years, 0-months
• Merseyside & South Lancs 6-years, 3-months
• Yorkshire 6-years, 3-months
• Manchester 6-years, 4-months
• West 6-years, 6-months
• London 6-years, 7-months
• South Wales 6-years, 7-months
• South Coast 6-years,7-months
• Busways 6-years, 8-months
• South West 7-years, 3-months
• East 7-years, 4-months
• East Kent 7-years, 4-months
• East Scotland 7-years, 7-months
• Norfolk Green 7-years, 8-months
• Highland 8-years, 4-months
• East Midlands 8-years, 6-months
• Cumbria & North Lancs 8-years, 9-months
• Bluebird 9years, 3-months
• Transit 10-years, 4-months

However, I think that all of the bus groups have bought businesses in good faith, all sold by the authorities in the full knowledge of what they were doing. Do you think that people who bought their council houses in good faith should have the ownership of them taken off them because of a change in the regulatory system? Or all of the other state assets that have been sold over the last 30 years?

Remember that BET Group was financially compensated when the government created the NBC in 1968.
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Nice, idea. But I doubt it would achieve that higher price with the current uncertainty.

I suspect that may have been a tongue in cheek remark, with the sale of the operations to Macquarrie and then buying back at a fraction

 

[winston270twm]

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I suspect that may have been a tongue in cheek remark, with the sale of the operations to Macquarrie and then buying back at a fraction

TGW,

Yes i was aware of that, I was referring to no-one being willing to pay top dollar for Busways if Stagecoach decided to sell rather than close the business with all the uncertainty surrounding Quality Contracts

 

[TheGrandWazoo]

TGW,

Yes i was aware of that, I was referring to no-one being willing to pay top dollar for Busways if Stagecoach decided to sell rather than close the business with all the uncertainty surrounding Quality Contracts

That much is obvious, but I don't think it was a serious exploration that Stagecoach would seek to sell
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Totally agree with the above statement, Busways doesn't get anywhere near the levels of new buses that Manchester does......

I don't know how well you know the Busways operations. In Newcastle, there has been a massive amount of investment in the gold mine services like the 1, 12, 38, 39, 40, 62, 63, with a fleet of e400s of both standard and hybrid varieties, and they are heaving.

However, you then get a very polarised situation with some decidedly scratchy suburban services in Newcastle, with South Shields being a financially depressed area. The comparison with Manchester isn't straightforward.

 

[winston270twm]

I don't know how well you know the Busways operations. In Newcastle, there has been a massive amount of investment in the gold mine services like the 1, 12, 38, 39, 40, 62, 63, with a fleet of e400s of both standard and hybrid varieties, and they are heaving.

However, you then get a very polarised situation with some decidedly scratchy suburban services in Newcastle, with South Shields being a financially depressed area. The comparison with Manchester isn't straightforward.

TGW, Not that well/not as well as I thought, I knew they have had some new investment, but it's not been in the same quantities that Manchester typically gets.

 

[TheGrandWazoo]

TGW, Not that well/not as well as I thought, I knew they have had some new investment, but it's not been in the same quantities that Manchester typically gets.

There is another little aspect was that Manchester used to get a lot of new vehicles but it was actually at the expense of Manchester. They allocated quite a lot in the mid 2000s which were then rapidly cascaded to weaker companies, such as UCOC, Glos, Devon that at the time couldn't carry the cost of new vehicles.

Therefore, Manchester took the financial hit whilst other firms got the benefit.

 

[Amberley54]

Didn't the Scottish Government propose abolishing bus de-regulation in Scotland, but eventually this was dropped?

Sometime before the proposal was dropped, Mr Souter made a donation of about £500,000 to the SNP.

Any suggestion that these two events were connected is of course completely untrue

He also bunged a considerable wedge at the pro-independance campaign, didn't he? I wonder what his/stagecoach's response to the outcome of that will be in the medium/long term?

 

[TheGrandWazoo]

He also bunged a considerable wedge at the pro-independance campaign, didn't he? I wonder what his/stagecoach's response to the outcome of that will be in the medium/long term?

I doubt there'll be little change on that stance. Also, unlikely that we'll see another referendum for 25 years

 

[radamfi]

Im trying to remember wasnt there two boughts of legislation, one that created them but no one ever used them and one a couple of years ago which made them easier to implement but still Nexus is the only one pursuing because its like using pulling a gun, everyone runs screaming. Other places are doing the quality partnerships which if I remember right locks operators in to providing a certain quality of service for so many years if a certain amount of infrastructure on a route is new rather than existing.

The original Quality Contract legislation came into force on 26 October 2001, the 15th anniversary of deregulation:

http://uk.practicallaw.com/uklegislation/uksi/2001/3342/made?view=plain

A lot of people were misled into thinking this would lead to QCs everywhere until it became clear that the conditions to create a QC were so difficult that they were effectively impossible to implement. They were made easier by the Transport Act 2008, but by that stage there was the fear that they would be cancelled by an incoming Tory government in 2010. As it turned out it was a coalition, so the Transport Act 2008 was not repealed, but the financial situation of course became dire. In addition, there was the more recent bribe of transferring BSOG to local authorities in Better Bus areas under Partnerships but not under QCs.
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Didn't the Scottish Government propose abolishing bus de-regulation in Scotland, but eventually this was dropped?

Sometime before the proposal was dropped, Mr Souter made a donation of about £500,000 to the SNP.

Any suggestion that these two events were connected is of course completely untrue

The SNP had a policy of scrapping deregulation before they came into power, but some time between the donation and the writing of the 2007 manifesto, the policy was dropped.