FirstGroup PLC (LSE:FGP) shares fell 2.1% on Monday morning on a report that the Department for Transport has called on the UK rail watchdog to limit approvals of private train services under the Open Access rail system.
The DfT has written to the Office of Rail and Road, a
Financial Times report has highlighted, to place pressure on the independent regulator to oppose the various live applications for new Open Access rail services, including a number by FirstGroup.
Under the Open Access programme, train services can be operated by private companies outside of the government-awarded franchises, run on a commercial basis to generally compete with franchised operators and not receive any government subsidies.
The letter from a senior official,
which has been published online, could affect applications by FirstGroup, Sir Richard Branson’s Virgin Group, Arriva and French trainmaker Alstom, the report said.
If all outstanding applications were approved by the ORR, franchised and public-sector train operators would lose out on a combined £229 million in annual revenue, the letter said.
Analyst Gerald Khoo at Panmure Liberum said the DfT’s letter "should be viewed as a monopolist opposing competing new entrants, which are permitted under the relevant legislation, subject to satisfying criteria set by the ORR".
"The letter is a reminder that it is the independent ORR that decides upon Open Access applications, not the DfT, although the latter appears to be trying to convince the ORR to move the goalposts on the criteria."
The key issues to watch following the letter, Khoo suggested, were whether the ORR "exerts its independence in the face of this pressure" from the government, and whether the ORR retains its status as a "fully fledged independent regulator" following the creation of Great British Rail.