The bus industry in Scotland – just a bunch of profiteering opportunists?

Cowie, Jonathan

Abstract

The Transport Act 1985 privatised and deregulated the bus industry in Great Britain outside of London, with the intention of creating a competitive industry that would compete for patronage through the economic principles of contestability and consumer sovereignty. As a result, the long term decline in bus patronage would be reversed. Over thirty five years and a plethora of Competition Commission inquiries later, such outcomes seem further away than ever. This paper undertakes an economic analysis of the supply side of the Scottish bus industry, and benchmarks key performance indicators against two comparator markets – the deregulated English market and the regulated London market, in order to establish the extent to which the bus industry in Scotland is dominated by profiteering monopolists.

Over a twenty year period, financial performance is assessed through an examination of fare, profit and dividend levels, and operational performance through an efficiency/productivity analysis derived using Data Envelopment Analysis (DEA). The research finds that over the period profit margins have fallen considerably, to such an extent that in both the Scottish and English deregulated markets these are not excessively above what could be termed ‘normal’ levels. With regards to productive efficiency, this has increased over the period reviewed. Finally with regard to productivity, this has remained neutral in the Scottish market, but this in the face of declining patronage. All of these findings are clear indicators of increased market pressures. The overriding conclusion is that this change has not been brought about by increased competitive pressures, but rather due to the fact that the industry in Scotland shows very clear symptoms of an industry still in long term decline. Increasingly however, this is reaching a critical point.

Citation

Cowie, J. (2018, May). The bus industry in Scotland – just a bunch of profiteering opportunists?. Paper presented at Scottish Transport Applications and Research (STAR) 2018

• Presentation Conference Type: Conference Paper (unpublished)
• Conference Name: Scottish Transport Applications and Research (STAR) 2018
• Start Date: May 22, 2018
• End Date: May 22, 2018
• Deposit Date: Jun 12, 2018
• Publicly Available Date: Jun 13, 2018
• Keywords: bus markets, privatisation, economic analysis, productivity, efficiency
• Public URL: http://researchrepository.napier.ac.uk/Output/1129458
• Contract Date: Jun 12, 2018