A broker in the City stated that the UK’s biggest rail operator could suffer a £1bn loss in revenue due to Labour’s proposal to bring train networks back under public control.
Peel Hunt analysts have reduced FirstGroup’s projected rail revenues for 2026, as recent polling indicates that Labour will win the next general elections.
FirstGroup owns South Western Railways, Avanti West Coast, and Great Western Railway, and runs about 4,500 buses in the UK.
Sir Keir’s Shadow Transport Minister has promised to pursue a radical plan for Britain’s Railways under a Labour Government.
The proposed changes include the reversal of the privatisation of the rail industry , which took place around the mid-1990s. However, companies are lobbying to stop the changes.
Peel Hunt’s Alex Paterson has said that he is “wary of rail” due to Labour plans for nationalisation.
He has therefore reduced the expected rail revenue of FirstGroup in 2026 from an earlier estimate of £2.79bn to £1.66bn. Peel Hunt, on the other hand, expects FirstGroup to report revenues of £3.7bn for its rail division next year.
Mr Paterson stated that the anticipated slump in revenue will result in a 15pc drop in FirstGroup’s profit in 2026, to £115m. This includes the bus operations of the company.
If Labour strips FirstGroup of rail contracts, Mr Paterson says it will be hit by a drop in ticket sales, car parking fees, and management fees.
In its half-year Report last month, FirstGroup recognized the potential risk of nationalization conveyed by the Labour party.
The company stated that it had communicated with the Labour Party, both directly and through industry channels, as the party was still in the process of developing its rail policies.
FirstGroup’s chief executive Graham Sutherland said the company is trying to diversify its business and move away from government-backed contracts.
Lumo Trains and Hull Trains are examples of commercial rail companies that operate “open access” without government involvement.
FirstGroup shares rose by 70pc over the last year despite the threat of nationalization. The company is now worth more than £1bn.
FirstGroup has been contacted to comment.
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