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Stagecoach jolt as City job axe culls commuters
Robert Lea03.12.08
Stagecoach today admitted for the first time that its commuter train services have become a victim of the financial crisis and the loss of up to 100,000 London jobs.
The admission by the operator of South West Trains and co-owner of Virgin Trains sent shares in FTSE 100-listed Stagecoach crashing 29.2p to 142.3p, extending the stock's collapse to 45% in the past three months.
Stagecoach today called the end of the rail boom of the last few years, saying huge job cuts in the City, Canary Wharf and Mayfair will lead to hundreds of staff being laid off on the railways.
It employs a total of 10,000 staff in South West Trains, running out of Waterloo and servicing the Surrey and Hampshire commuter belt, in its Euston-based joint venture Virgin Trains and on East Midlands Trains with its services into St Pancras.
Even if Stagecoach's cutbacks are as little as 5%, that will mean more than 500 jobs face the chop. Robert Speirs, chairman of Stagecoach, founded and run by tycoon Brian Souter, said: "While the depth and duration of the economic downturn is difficult to forecast, we anticipate a sharp reduction in central London employment and a fall in UK gross domestic product during the next 12 to 18 months.
"Our rail operations are more susceptible to changes in economic conditions, partly because of the relatively high fixed-cost base of the UK train operating company model. As a result, we are taking action now to ensure our UK rail businesses remain competitive.
"Our plan includes a cost reduction programme in our rail operations, which will include headcount reductions and maximising revenue from planned rail initiatives."
The job cuts come weeks after National Express slashed 300 jobs in its Liverpool Street commuter services to and from East Anglia. The moves follow the most sustained boom on the railways in more than a generation.
Rail bosses were until recently hailing a fundamental "modal shift" as people got out of their cars because of the high cost of fuel and environmental concerns, and took the train to work.
However, that shift appears to have been short-lived as fuel inflation has turned into economic recession.
The boom has continued until very recently. Stagecoach today said railway revenues grew more than 8% in the six months to the end of October.
Profits from its wholly owned rail businesses South West Trains and East Midlands leapt 25% to £31.7 million while at Virgin Trains, 49% owned by Stagecoach, they were up 17% at £30.8 million.
Stagecoach, which also has substantial bus operations, said group half-year pre-tax profits were up 24% at £105 million on revenues 27% ahead at just over £1 billion. However, fears of a slowdown on the railways have not hurt the dividend, 25% of which goes to Souter and his sister Ann Gloag. The interim dividend is up 33% to 1.8p.
A Stagecoach spokesman said: "The headcount reduction will not involve areas that compromise safety or train performance or delivery of services.
"What we are looking at is back-office and support-service functions. What we are doing is prudently preparing."
Reader views (10)
Well lads you can always go dig some bodys garden for your benefits.
- Kev, London
I love Dc Londons comments. Absolutely spot on! When we thouight finally we might get some space, let alone a seat, they cut the service. Its poor.
- Jackie J, London UK
I am waiting for them to say something along the lines of "Due to even more people in the city being sacked we have had no other choice but to increase fares".
- Serox, London
What?? The trains are no less crowded. This is just a cynical move by Stagecoach to increase their profits. Enough of this franchise rubbish, bring the trains back into public ownership!
- John, Bedford
Ha ha ha what a joke, is this April Fools day already? A small amount of people have been layed off and instead of accepting the fact commuters may just may get a better service out of it, they cut the amount of staff to ensure it remains the same shoddy, overpriced, crappy service it always has been. Surely its not an excuse to get rid of dead wood is it?
- Dc, London
Good. They've treated their customers like dirt for the last 20 years, now it's payback time. I hope they all go bust.
- Derek, London
Hopefully they will all be forced to hand back their franchises and we can look forward to a properly-run, publicly owned rail service like in other, more civilised European countries.
- Robert C, London UK
Next, the government will be spinning this into a story about how trains are less crowded nowadays because of their visionary investment in transport. Watch this space...
- Nobby Clark, Perth, Scotland
Perhaps if the railway companies considered cutting prices it would encourage more people to travel by rail. I was nearly alone in my carriage on an a very early train into St Pancras on Tuesday morning.
- Neil Simmonds, Kettering
We have not seen any reduction in train use yet. It seems that the 'bean counters' have found an excuse to reduce overheads such as closing ticket offices and increasing the number of unstaffed stations. This leads to reduced revenue protection and lower safety levels for travellers. In contrast, I would not be surprised that the decision by London Overground to staff their stations throughout the hours of operation has resulted in more passengers and higher revenue.
These companies should be more proactive in attracting more users to the railways and not start a circle of decline which took place during the years of under investment in British Rail.
- Mike Constable, London UK
