Merseyside bus network

[ivanhoe]

Quoted from today's Liverpool Echo

" the next government must put control of Merseyside’s bus network back in public hands, council chiefs are demanding.

Liverpool City Region Combined Authority has told Whitehall mandarins that the region needs to be in charge of buses.

If granted the powers would put Merseyside on an equal footing with London, where public body Transport for London oversees the network.

At the moment private bus operators on Merseyside are free to set timetables, routes and fares.

In London bus passengers pay a flat fare of £1.50 - whereas the cheapest in Merseyside on privately run services is £2.

It is hoped that by bringing control of buses back into public hands, fares can be made more reasonable.

The demand will be re-iterated to the new government after the General Election on May 7.

The proposal from the combined authority is also a recommendation by an independent commission set up by Liverpool Mayor Joe Anderson."

I for one are glad that the City Region Authority are taking this on. There's a long way to go and it will be an uphill battle, but at least they are showing intent.

 

[KendalKing]

Strange that Liverpool City Council, are demanding the control of Buses services, so soon after they had removed Bus Lanes from the streets of Liverpool.

 

[ivanhoe]

Strange that Liverpool City Council, are demanding the control of Buses services, so soon after they had removed Bus Lanes from the streets of Liverpool.

It's the City Region (Merseyside plus Halton) that wants it but I understand the irony of the Bus Lanes.

 

[Robertj21a]

Hope all Liverpudlians are prepared for the significant extra taxes needed to subsidise routes if they wish to be in line with London.

 

[NorthernSpirit]

If they want to have public transport back in the publics hands then they will need to vote for another party as far too many of them are stuck in a rut by voting Labour, who I will add, finished off the privatisation of BR.

 

[childwallblues]

Arriva and Stagecoach are the main players in Liverpool and do a reasonable job. I cannot see what advantage would be gained by having London style operations.

 

[SpacePhoenix]

What would happen if it was taken into public hands and Stagecoach and Arriva walked away, presumably they own the buses they run, so would presumably be free to take their bus fleets away for redeployment elsewhere?

 

[radamfi]

What would happen if it was taken into public hands and Stagecoach and Arriva walked away, presumably they own the buses they run, so would presumably be free to take their bus fleets away for redeployment elsewhere?

There are a few areas ahead of Merseyside in the queue for bus regulation so presumably what happens there will give an indication. Obviously Tyne & Wear is furthest along that road with a Quality Contract Scheme and it is currently under consideration from the Quality Contract Scheme Board.

The Government's devolution plans for England include bus powers for the local area. Devolution for Greater Manchester was announced some time ago and Cornwall was the first non-metropolitan area to be awarded devolution a few days ago.

 

[the101]

Hope all Liverpudlians are prepared for the significant extra taxes needed to subsidise routes if they wish to be in line with London.

And there is the bottom line to all these ill thought out council demands to take back control of bus services.

Where does the money to do it come from? Where does the money to cut fares come from? In an age where financial austerity is going to be around for some years yet, where do the pounds, shillings and pence for these schemes come from?

Nexus, with their fiscal ineptitude related to franchising in the process of being exposed, have a lot to answer for. They have inspired officials who, while elected, are not very bright to jump on the bandwagon like the hopeless blunderers that they are. Lemmings.

 

[radamfi]

Where does the money to do it come from? Where does the money to cut fares come from? In an age where financial austerity is going to be around for some years yet, where do the pounds, shillings and pence for these schemes come from?

If you assume for one moment that regulation is desirable, if it isn't affordable now, when will it be affordable? Even before the financial crisis when the economy was booming, it was claimed that regulation was not affordable. Chances are, the longer you wait, the more expensive it would get as commercial services gradually get withdrawn over time.

The industry will have to get used to franchising as this Tory government seems hell bent on pursuing its devolution agenda. There's nearly five years until the next election.

 

[Robertj21a]

There's nearly five years until the next election.

Without getting too far into pure politics, it could be nearer 10-15 years before there's any significant change, given the absence of any effective opposition nowadays.

 

[transmanche]

What would happen if it was taken into public hands and Stagecoach and Arriva walked away, presumably they own the buses they run, so would presumably be free to take their bus fleets away for redeployment elsewhere?

Just like they haven't done in London...?

 

[radamfi]

Whilst existing operators may lose their current territory under tendering, there is of course the opportunity to pick up franchises in areas where they don't currently operate.

 

[TheGrandWazoo]

Just like they haven't done in London...?

In London, Stagecoach and Arriva (and other firms) make around 6 to 8% IIRC so they get plenty of cashflow but not much profit. Many now lease vehicles on a coterminus basis as well as a result to avoid tying up capital (and being saddled with a load of knackered deckers with odd TfL specs).

In the provinces, the major firms make better margins generally. Making all of them lower margin businesses is hardly going to help.

I'm really interested in seeing how Cornwall will operate franchising. Knowing what a fantastically lucrative area it is, how will it pay for the people to manage the franchising process and manage service delivery, and provide more, newer vehicles and for any contractor to come in and make 7%?

I have a very nasty feeling about the Tories' rush to allow franchising. One suspects it's got bog all to do with devolution and promoting localism but more to do with being able to cut funding (directly from DoT or indirectly from DLGR) and continue their neo-hawk hollowing out of the state. I don't trust Osborne or Cameron one iota and we won't have an opposition for a while (if at all if Corbyn is elected Labour leader)

 

[transmanche]

In London, Stagecoach and Arriva (and other firms) make around 6 to 8% IIRC so they get plenty of cashflow but not much profit.

That's a pretty decent profit margin. Higher than most TOCs and high street retailers.

 

[TheGrandWazoo]

That's a pretty decent profit margin. Higher than most TOCs and high street retailers.

Higher than most high street retailers? No it isn't.

Also, trying to compare like that doesn't reflect cashflow, working cap, etc nor level of risk.

 

[transmanche]

Higher than most high street retailers? No it isn't.

Not most high street retailers. But higher than Asda, Tesco, Sainsbury's, Morrisons, Marks & Spencer, Dixons Carphone (Currys/PC World/Carphone Warehouse) and John Lewis...

 

[childwallblues]

There are a few areas ahead of Merseyside in the queue for bus regulation so presumably what happens there will give an indication. Obviously Tyne & Wear is furthest along that road with a Quality Contract Scheme and it is currently under consideration from the Quality Contract Scheme Board.

The Government's devolution plans for England include bus powers for the local area. Devolution for Greater Manchester was announced some time ago and Cornwall was the first non-metropolitan area to be awarded devolution a few days ago.

There are a number of Quality Bus Partnerships across Merseyside.

 

[TheGrandWazoo]

Not most high street retailers. But higher than Asda, Tesco, Sainsbury's, Morrisons, Marks & Spencer, Dixons Carphone (Currys/PC World/Carphone Warehouse) and John Lewis...

M&S is 7.5% and Tesco is 6.2% but off much higher revenues. They also have much better cashflow.

If bus operation is such a fantastic margin operation, you wonder why any companies go out of business.....

 

[transmanche]

M&S is 7.5% and Tesco is 6.2% but off much higher revenues.

M&S net profit margin is 4.67% according to the FT. Tesco made a loss, so their profit margin was negative, -9.18% - although their gross margin was 3.41%.

If bus operation is such a fantastic margin operation, you wonder why any companies go out of business.....

I thought we were talking about Arriva and Stagecoach here?

If anything, a contract system gives a bus company security. They know exactly what their income will be over the life of the contract. Fact is, Arriva and Stagecoach are happy to accept lower profit margins in London than they make elsewhere. Would you rather make a guaranteed 7.5% over the next five years, or go for 15% in a market where someone else might undercut you and force you out of business?

 

[AB93]

M&S net profit margin is 4.67% according to the FT. Tesco made a loss, so their profit margin was negative, -9.18% - although their gross margin was 3.41%.

I thought we were talking about Arriva and Stagecoach here?

If anything, a contract system gives a bus company security. They know exactly what their income will be over the life of the contract. Fact is, Arriva and Stagecoach are happy to accept lower profit margins in London than they make elsewhere. Would you rather make a guaranteed 7.5% over the next five years, or go for 15% in a market where someone else might undercut you and force you out of business?

You have certainty for five years, and then complete uncertainty after that. You might start loosing all your contracts, as Arriva London has been doing at an alarming rate over the past couple of years.

Plus, whatever the margin is you're making on TfL work, it's not guaranteed to stay the same over the life of the contract at all. Various factors may change it over the course of the contract.

 

[transmanche]

Plus, whatever the margin is you're making on TfL work, it's not guaranteed to stay the same over the life of the contract at all. Various factors may change it over the course of the contract.

Compared of course to the 'complete certainty' of the deregulated bus market... :roll:

 

[AB93]

Compared of course to the 'complete certainty' of the deregulated bus market... :roll:

That wasn't the point - I didn't talk about that bit.

You said that London offers complete certainty. I pointed out that it doesn't.

 

[the101]

There are a number of Quality Bus Partnerships across Merseyside.

Quality bus partnerships as seen in Merseyside already are not the same thing as quality contracts (as proposed by the financially inept Nexus) and the franchising model.
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What would happen if it was taken into public hands and Stagecoach and Arriva walked away, presumably they own the buses they run, so would presumably be free to take their bus fleets away for redeployment elsewhere?

That is correct, and Brian Souter stated that if Nexus do get their way with the QPS in the north east then he will close Stagecoach's operation there and make everyone redundant. Whether he would or not I don't know, but I doubt he is the kind of guy that makes limp promises.
--- old post above --- --- new post below ---

If you assume for one moment that regulation is desirable, if it isn't affordable now, when will it be affordable? Even before the financial crisis when the economy was booming, it was claimed that regulation was not affordable. Chances are, the longer you wait, the more expensive it would get as commercial services gradually get withdrawn over time.

The industry will have to get used to franchising as this Tory government seems hell bent on pursuing its devolution agenda. There's nearly five years until the next election.

It will never be affordable. The half-wits at Nexus think that they can get more out of the same money going in. Tney genuinely think that operators in the north east will run services for little to no net profit. I sat at the UK Bus Summit earlier this year and listened to their top man say that, under their proposals, the service will be better for less cost to the public purse. That is how divorced from reality they are.

They simply do not have the foggiest idea what they are talking about, and it is very worrying for the north east that people this dumb are in positions of power there.

All the suggestion of QPSs and franchising will do is introduce uncertainty into the existing market.

 

[TheGrandWazoo]

M&S net profit margin is 4.67% according to the FT. Tesco made a loss, so their profit margin was negative, -9.18% - although their gross margin was 3.41%.

I thought we were talking about Arriva and Stagecoach here?

If anything, a contract system gives a bus company security. They know exactly what their income will be over the life of the contract. Fact is, Arriva and Stagecoach are happy to accept lower profit margins in London than they make elsewhere. Would you rather make a guaranteed 7.5% over the next five years, or go for 15% in a market where someone else might undercut you and force you out of business?

Tesco's margins were because of a wholesale clearout of bad news.

Fact is, Stagecoach may be happy to take a lower margin for London but they recognise that it ties up a lot of management time and capital. It's ok for an element of their business but will they want to have ALL their business as a low margin business. The group margin is considerably lower (as is operating margin)

http://www.macroaxis.com/invest/ratioCompare/SGC.L--Operating-Margin--Profit-Margin
--- old post above --- --- new post below ---

It will never be affordable. The half-wits at Nexus think that they can get more out of the same money going in. Tney genuinely think that operators in the north east will run services for little to no net profit. I sat at the UK Bus Summit earlier this year and listened to their top man say that, under their proposals, the service will be better for less cost to the public purse. That is how divorced from reality they are.

They simply do not have the foggiest idea what they are talking about, and it is very worrying for the north east that people this dumb are in positions of power there.

All the suggestion of QPSs and franchising will do is introduce uncertainty into the existing market.

Absolutely. It clearly doesn't stack up (even Nexus had to admit that and recut their figures initially) - I occasionally wander onto another forum where peoples signatures say "I'm in full support of QCS" and you wonder if they've even bothered to look at the finances - actually, you know they haven't.

 

[radamfi]

Compared of course to the 'complete certainty' of the deregulated bus market... :roll:

To be fair, deregulation is pretty low risk for the major groups as they are basically untouchable as they know they can (generally) easily crush or simply ignore wannabe competitors. Their main risks are the decline in the business due to people simply not wanting to travel with them for whatever reason and unforeseen increased costs. But even in that case they can simply cut services or withdraw from the area altogether.

So it is obvious that deregulation is better for operators, so they will make less money under franchising. But they will still make some money, and wherever franchising exists there seem to be no problem finding companies to bid for routes. Foreign based groups such as Transdev, Abellio and RATP are particularly comfortable with working in a regulated environment.

 

[transmanche]

You said that London offers complete certainty.

No I didn't. I said it offers them security: they know what their income will be for the life of the contract and can plan accordingly. In a deregulated market, they don't have that luxury.
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Tesco's margins were because of a wholesale clearout of bad news.

And even in a good year, it's not much more than the average TOC.

Fact is, Stagecoach may be happy to take a lower margin for London but they recognise that it ties up a lot of management time and capital. It's ok for an element of their business but will they want to have ALL their business as a low margin business.

So let's have a look at their business unit operating margins:

UK regions bus - 13.5%
London bus - 10.1%
UK rail - 1.8%
North America - 5.2%

I'd say that Stagecoach are very happy with their London operations!

Source: Stagecoach annual report 2015

 

[the101]

Absolutely. It clearly doesn't stack up (even Nexus had to admit that and recut their figures initially) - I occasionally wander onto another forum where peoples signatures say "I'm in full support of QCS" and you wonder if they've even bothered to look at the finances - actually, you know they haven't.

It's not surprising. People hear what those in local government say about QCS, and that it will improve services and reduce fares. And because these elected people have not a clue how much implementing QCS will actually cost, the bloke in the street who now thinks it is manna from heaven doesn't realise that it will inflate the price of providing bus services, substantially in most cases.

The whole keenness from LAs to take on the franchising/QCS model is borne out of small-minded localist politics. These people think that they will 'stick it to the man' and show the likes of First, Arriva, Go-Ahead and so on who the boss is. That there is simply no way that doing so would be cost effective does not occur to them.

 

[AB93]

No I didn't. I said it offers them security: they know what their income will be for the life of the contract and can plan accordingly. In a deregulated market, they don't have that luxury.

OK OK, I didn't quote your exact words. You said it offers them security, and gave an example of a "guaranteed [margin of] 7.5%". That's what I (tried to) take issue with - you cannot guarantee the margin.

As radamfi says, the de-regulated market is actually quite low risk. There's certainly more chance of another operator winning a TfL contract for dozens of buses from you, than there is a rival operator rocking up in the provinces and competing on all of your corridors.


Unfortunately, the biggest uncertainty at the moment is the whole situation we're now in, the Buses Bill and franchising. It's clearly being done on the hoof by government, which leaves the entire industry hanging in the air as to what happens next. Whatever your opinion on re-regulation etc, you can't deny the way government is currently going about it is very poor indeed, and really not a great thing to do to an industry carrying millions of passengers every day.

Can you imagine if they said to Tesco and Sainsbury's, "oh, by the way, sometime near Christmas, we may or may not come up with a bill that will take your businesses away from you"?!

 

[TheGrandWazoo]

No I didn't. I said it offers them security: they know what their income will be for the life of the contract and can plan accordingly. In a deregulated market, they don't have that luxury.
--- old post above --- --- new post below ---
And even in a good year, it's not much more than the average TOC.

So let's have a look at their business unit operating margins:

UK regions bus - 13.5%
London bus - 10.1%
UK rail - 1.8%
North America - 5.2%

I'd say that Stagecoach are very happy with their London operations!

Source: Stagecoach annual report 2015

Stop googling stuff and picking out the bits that happen to serve your narrative.

There's a lot within the full business accounts of each organisation. In Stagecoach's case, they have a London business that makes a reasonable turn - didn't say it never. However, the proportion of its bus operation is 20% - dragging the other UK bus operations to that level will take the overall group profit down by 18% - that's why Souter isn't pleased and wouldn't want to see it happen.

Comparing to TOCs and high street retailers is massively unrepresentative given the different environments such as risk, cashflow etc. Also, the group profit of someone like Tesco hides a multitude of sins of where and where not they make their money even in the UK. And hey, why not compare to a housebuilder whose margins are higher?

In short, I don't trust Osborne - this is a ploy to again reduce overall spending. Not a case of no new money but less from central government with franchising given to LAs/PTEs that have a less than impressive record.