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Watchdog blocks rail signalling merger

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An investigation by the Competition & Markets Authority (CMA) has provisionally concluded that Hitachi’s €1.7bn proposed acquisition of the Thales Ground Transportation (GTS) business could lead to a substantial lessening of competition in the supply of digital mainline and urban signalling rail systems.

Hitachi and Thales are two of the big four global suppliers of signalling systems for mainline and urban railway networks – along with Siemens and Alstom.

Network Rail is planning to upgrade much of the country’s rail signalling system over the next decade with new digital technologies. Transport for London (TfL) is also expected to begin replacing the signalling systems on two of London’s main underground tube lines over a similar period.

The CMA’s independent inquiry group considered the impact of the merger on mainline signalling and provisionally found that, should the merger go ahead, there would be fewer credible bidders remaining for digital mainline signalling tenders in the UK, which could raise costs for Network Rail and negatively impact the digitalisation of the rail network.

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Stuart McIntosh, chair of the independent inquiry group, said: “UK railway networks spend millions of pounds each year maintaining and upgrading signalling systems which ensure transport networks run smoothly and passengers remain safe. Healthy competition in this market is essential to support innovation as well as to keep costs down.

“We have provisionally found that, should the Merger go ahead, it would reduce the number of signalling suppliers in what is already a highly concentrated industry, and the resulting loss of competition could leave transport networks and passengers worse off.

“We will now consult on our findings and on how Hitachi and Thales might address our concerns, in a way that protects passengers and delivers the government’s objective for a more reliable, efficient and modern railway.”

The CMA will now consult on its provisional findings and potential remedies to ensure competition is protected in the supply of both digital mainline and urban signalling in the UK. This could range from requiring Hitachi or Thales to sell parts of their existing businesses to prohibiting the merger altogether.  

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