UK’s biggest train operator faces £1bn hit under Labour renationalisation
Britain’s biggest rail operator is facing a £1bn hit to revenues under Labour’s plans to bring train networks back under public ownership, a City broker has said.
Analysts at Peel Hunt have downgraded FirstGroup’s expected rail revenues in 2026 as recent polling points to a Labour victory in the next general election.
FirstGroup owns South Western Railways, Avanti West Coast, Great Western Railway and operates almost 4,500 buses in the UK.
Sir Keir Starmer’s shadow transport minister has pledged to pursue a “radical” plan for Britain’s railways under a Labour government.
This includes potentially reversing the privatisation of the rail industry that took place in the mid-1990s, although companies are lobbying against the proposed changes.
Peel Hunt’s Alex Paterson said he has taken a “cautious view of rail due to Labour’s nationalisation plans”.
As a result, he has cut FirstGroup’s expected rail revenues in 2026 to £1.66bn down from earlier estimates of £2.79bn. In contrast, next year Peel Hunt expects FirstGroup’s rail division to post revenues of £3.7bn.
Mr Paterson said the expected slump in revenues will lead to a 15pc fall in FirstGroup’s profits in 2026 to £115m, which also includes the company’s bus operations.
Should Labour strip FirstGroup of its rail contracts, Mr Paterson said it will suffer from a plunge in ticket sales, management fees and car parking charges.
FirstGroup acknowledged Labour’s nationalisation threat in its half-year report last month.
It said it was “engaging directly and through industry channels with the Labour Party, which is still developing its rail policy in detail”.
Chief executive Graham Sutherland has said FirstGroup is currently attempting to diversify the business away from government-backed rail contracts.
This includes developing commercial “open-access” rail businesses which have no government involvement, such as Lumo and Hull Trains.
Despite the threat of nationalisation, FirstGroup’s shares have risen by almost 70pc in the past year, with the company now valued at more than £1bn.
A FirstGroup spokesman said: “We continue to demonstrate our experience and expertise in rail to bring value to the Government under existing contracts, where we strive to improve customer experience and reduce subsidy levels in the rail businesses we operate.
“We also continue to engage with both the Government and Opposition on reforms necessary to continue rail’s recovery post-pandemic.”
