Source - Alliance News

The UK Office of Rail & Road on Tuesday said the station catering market ‘is not working as effectively as it should be’, though it opted against calling for a probe by the more powerful competition watchdog.

Shares in SSP Group PLC, the owner of Upper Crust and a dominant force in the railway catering space, rose 0.6% to 235.80 pence. WH Smith PLC, which also has a sizeable presence in UK railway stations, was 1.8% higher at 1,335.00p.

The ORR believes the best course of action is to ‘address the problems identified in our capacity as sectoral regulator’, instead of turning to the Competition & Markets Authority.

‘ORR is investigating this sector because it believes that a more competitive market would provide better options for passengers and allow station operators to increase investment in the railway. The regulator’s report finds that outlets can stay in the same hands for extended periods because their leases are protected,’ the ORR said.

‘Those who run stations are not sufficiently incentivised to invite competition for outlets. Even when unprotected leases come up for renewal, the most common practice is to roll over or extend the lease without an open competition. Competition for outlets is a crucial factor across the market, because nearly half of all stations (47%) with retail space have just one outlet.’

SSP is the largest ‘single player in station catering’, the ORR said. Costa Coffee and WH Smith are the next largest.

The ORR said the next stage of its probe is to focus on recommendations to make to the government and station operators.

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Ssp Group PLC (SSPG)

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