Speculative : future of the British bus industry

[TheGrandWazoo]

GrandWazoo - my understanding of accountancy is rather more basic than yours, I think you have answered an important question, I have been puzzled for some time why for instance, First South Yorkshires annual accounts have shown a loss for several years (there are other examples around the country), clearly not just a short term 'blip'.
I guess political sensitivities play a part too, however it looks like the looming end of covid support will force operators to make (or at least threaten) service cuts, cynics might say provide an acceptable reason?

There is that reason but there's another (linked) reason as well why zombie firms persist.

I used to work for a large business that had a subsidiary that was losing £5m a year. You'd close it down except the exit liabilities (e.g. redundancy, asset writedowns, property dilapidations - the cost of restoring buildings back to the standard that the landlord had initially leased them at, etc) were £40m. For some years, the CEO simply didn't want to face into that bad news. Only when a new CEO came around was a sale agreed at a knock-down price, with a consequent goodwill writedown of £30m but he had the justification that it was the old regime and he was sorting it out.

Remember when First finally decided to get shot of Greyhound, they had to face into a goodwill writedown (twice) and it cost Tim O'Toole his job.

 

[GoneSouth]

Yes, but only a few. The number of bus passenger journeys taken on £8 single tickets in England (on a single section of registered local bus service - i.e. not across two or more registrations constituting a 'split' registered service) will be an insignificant percentage of the total.

So would a split registration effectively mean the £2 cap would actually total £4, a capped fare for each registered portion of route? Seems a little unfair, passengers couldn’t give a whatsit about the technicalities of how a route is registered !

 

[RT4038]

So would a split registration effectively mean the £2 cap would actually total £4, a capped fare for each registered portion of route? Seems a little unfair, passengers couldn’t give a whatsit about the technicalities of how a route is registered !

I do not know, but it is quite possible. It is as unfair as a two mile journey involving changing buses will likely be £4 too.

 

[Bletchleyite]

I do not know, but it is quite possible. It is as unfair as a two mile journey involving changing buses will likely be £4 too.

It would be better if the £2 was a two hour ticket. For very long journeys two of them would still be bargainous.

 

[RT4038]

It would be better if the £2 was a two hour ticket. For very long journeys two of them would still be bargainous.

Maybe, but too complicated to administer and enforce.

 

[Ken H]

It would be better if the £2 was a two hour ticket. For very long journeys two of them would still be bargainous.

Its a silly gesture. People who need a bus don't travel long distances. This will just be used, like ENCTS, for oldies to have a jolly.

 

[GoneSouth]

I do not know, but it is quite possible. It is as unfair as a two mile journey involving changing buses will likely be £4 too.

Yes you’re right, if we had a London Style system and London style caps, life would be significantly cheaper for me! I don’t consider £3.50 for 4 miles good value at the moment!

Maybe, but too complicated to administer and enforce.

Initially yes, but isn’t that how the London fare cap works. Doable if centrally controlled/regulated like London is now

 

[markymark2000]

I think for split routes, it would stay as a £2 through the splits because the point is cutting single tickets down to £2. I can buy a single through ticket from A-C and so that should be £2. Doesn't matter that it's split.

In the same way that 95% of the time when a route is split, concessionary tickets aren't rescanned, I think the same will be the case for single tickets.

 

[ChrisC]

Yes you’re right, if we had a London Style system and London style caps, life would be significantly cheaper for me! I don’t consider £3.50 for 4 miles good value at the moment!

I’m in exactly the same situation. It’s 2.8 miles from the village where I live into the nearest town and the fare is £3.20. It therefore costs £6.40 for a return journey just to go to the shops, post office, library, health centre etc. The bus company daily cap is £6.50 so that doesn’t help. I don’t mind walking one way if the weather is ok but I usually end up using my car. Fortunately I get my ENCTS pass in October but the first hourly bus after 0930 has regularly been cancelled recently due to shortage of drivers.

 

[johncrossley]

Initially yes, but isn’t that how the London fare cap works. Doable if centrally controlled/regulated like London is now

Even some companies outside London do 60 minute tickets on the app, at least I've seen that mentioned somewhere. I can't remember what regions do that. That suggests that it is merely extreme conservatism preventing wider implementation.

 

[RT4038]

Even some companies outside London do 60 minute tickets on the app, at least I've seen that mentioned somewhere. I can't remember what regions do that. That suggests that it is merely extreme conservatism preventing wider implementation.

I do not think that Govt. will do anything complicated for a 6 month trial.

I would suggest that the routes of any company doing that kind of ticket will be limited.

 

[Tetchytyke]

I don't wholly understand why DB don't close it down if it's losing them money.

It isn't losing them money.

The companies' accounts might show a loss, but there are significant "management" and "consultancy" fees winging their way back to Germany. Arriva Northumbria were posting a 20% loss at one point, if you believe that you'll believe anything.

That said, bus operation isn't the profit machine it once was. The 20% margins are long gone, ENCTS, fuel prices and 10% pay rises have seen to that.

The idea of charging a flat £2 fare isn't particularly exciting though. Urban areas' fares are about that now, especially if you use the operator's app. First West Yorkshire charge £2 single/£5 day, Arriva Merseyside is roughly the same. It might cut down on some of the more rampant ENCTS single fare abuse (hi GNE), but beyond that, it's a zombie promise from a zombie government. It might just kill off rural buses for good, though.

 

[GusB]

There is an existing thread for the £2 price cap on fares, which you'll find here:

£2 Price Cap on fares in England - Now extended beyond October 2023

Roger French has written a blog about a suggestion that single fares could be capped at £2 https://busandtrainuser.com/2022/07/03/to-cap-it-all-a-2-limit/ Speculation is growing of an imminent announcement of a £2 cap on all bus fares throughout England to apply for six months from October...

www.railforums.co.uk

 

[Deerfold]

The idea of charging a flat £2 fare isn't particularly exciting though. Urban areas' fares are about that now, especially if you use the operator's app. First West Yorkshire charge £2 single/£5 day, Arriva Merseyside is roughly the same. It might cut down on some of the more rampant ENCTS single fare abuse (hi GNE), but beyond that, it's a zombie promise from a zombie government. It might just kill off rural buses for good, though.

They charge £2 per trip if you buy on the app. The £5 day ticket is less impressive when you realise you can get a multi-operator one for that price on the app - and the only route that's not valid on all of is the 184.
Unfortunately when First introduced the £2 fare they removed the smaller area tickets within West Yorkshire, so many people's travel costs increased.

 

[WY Bus Spotter]

Councils are not helping
Leeds are pedestrianising the city centre. long gone are the days of the main shopping street (Briggate) thronging with people shopping and queuing for the trams and later buses. Its pedestrianised so people who find walking difficult or with heavy bags of shopping have to walk through to Vicar Lane.
And now they are removing the bus stops near the railway station. So people completing their journey by bus have a trek across City Square. And they wonder why the city centre is dying. Integration? Ha!
Compare with Harrogate. Nice central bus and rail station and buses passing to the east and the west of the main shopping centre. The place just feels busier
But if bus staff wages are to be raised to be competitive, then a lot more subsidy will be needed. Will people who never use public transport vote for such a subsidy when 'schools and hospitals' need the money more.

Leeds has been pedestrianised since what, the late 90s? It's still bustling everytime I'm in town. I'm not sure where you've got this idea from.

The centre of Harrogate is also pedestrianised, though it is naturally a smaller area as it is a smaller town.

 

[TheGrandWazoo]

Yes you’re right, if we had a London Style system and London style caps, life would be significantly cheaper for me! I don’t consider £3.50 for 4 miles good value at the moment!


Initially yes, but isn’t that how the London fare cap works. Doable if centrally controlled/regulated like London is now

It is doable with technology. It doesn't need to be centrally controlled or regulated. However, London can't afford the hopper fare as it is, so hence why it hasn't been extensively replicated in the provinces.

One major issue that is killing London's buses (as well as the hopper fare) is the slow speed of buses. They are simply slow. This has created through the taking of road space for cycle routes, the erosion of the congestion zone (incl. the removal of the western extension) and increasing congestion, and also the incredibly slack running times that have driven the wrong behaviours in operators with excess time en route. It needs to be a fair balance of carrot and stick. Give people decent bus routes with competitive travel times from bus priority, and curb some of the freedoms of the car user. Not some anti-car crusade but just even things up a bit. Go to Brighton or Nottingham - that's what they've done.

The real challenge is how they manage to recruit and retain staff though, and that is less solvable. The abject reliability of some firms/services from staff shortages is causing irreparable harm.

 

[Eyersey468]

Sorry, Neil and I'm not being narky but I don't know how much clearer I can be. Goodwill is not about some view or perception on how well thought of any business is. It is a clearly defined figure in accounting terms

Purchase price (x) less value of tangible assets (y) = intangible assets aka goodwill (z)

You buy a business and pay a price that you think is appropriate. It comes with tangible assets - property, IT hardware, furniture, vehicles or whatever. Whatever the difference between the purchase price and the value of tangible assets is goodwill.

Rotala bought Johnsons Warwickshire bus services but only paid the market value for the buses. There was no goodwill despite it being a well-respected operator as Johnsons were keen to get out of bus operation. However, with Midland Classic, it was a far more attractive purchase for Rotala so they paid more than the mere value of the assets

Purchase price £2m less value of tangible assets £1.3m = goodwill £0.7m

What happens if the value of the tangible assets is more than the purchase price, does that mean the goodwill is negative?

 

[TheGrandWazoo]

What happens if the value of the tangible assets is more than the purchase price, does that mean the goodwill is negative?

Technically yes. Usually indicates a fire sale!

It's pretty rare though. Even when Stagecoach sold their London bus ops to Macquarie for £246m and bought them back for £53m about 4 years later, you'd think that there would be no goodwill or even negative on that repurchase. It was actually about £3.5m... I suspect that the previous owners had not just leased the new fleet but had done a sale and leaseback on the existing owned fleet?

 

[RT4038]

Technically yes. Usually indicates a fire sale!

It's pretty rare though. Even when Stagecoach sold their London bus ops to Macquarie for £246m and bought them back for £53m about 4 years later, you'd think that there would be no goodwill or even negative on that repurchase. It was actually about £3.5m... I suspect that the previous owners had not just leased the new fleet but had done a sale and leaseback on the existing owned fleet?

This would be referring to the book value of the tangible assets in the company accounts - I should imagine this could quite easily be more than the actual value (i.e. what you manage to sell them for), especially if there is a glut of such assets on the market.

 

[Simon75]

Instead of councils/PTE'a (Public transport executives) funding services, what about direct funding from the Department of Transport ?

 

[Ken H]

Instead of councils/PTE'a (Public transport executives) funding services, what about direct funding from the Department if Transport ?

That would make sense for cross border routes. Many routes round here do 2 or 3 counties.