How the government is allowing the Japanese to profit from captive London and Brummie commuters
Earlier this month the Department of Transport extended its recommended list of bidders to run Britain's railways to a privatised rail company in Japan.
It shortlisted East Japan Railway as a minority partner with the Dutch state rail company Abellio, in the consortium West Midlands Trains Ltd as one of three groups bidding to take over the West Midlands franchise next October. which provides commuter services into London and Birmingham including my home town of Berkhamsted.
But more significantly it decided that East Japan Railway would qualify as an approved bidder for any other franchise up for grabs until 2020.
The Telegraph presented the bid as a move by a company at the cutting edge of technology as it provides some of Japan's bullet train services.
But anyone thinking those on the crowded commuter routes will be whisked in by a super bullet train service should think again.
The story is in fact the exact opposite once you study the company's latest annual report.
What it shows is that the bedrock of the company's regular income is its commuter services around Tokyo not its bullet trains. And the prospect for making any more money out of them is a tad bleak.
It reveals that the company is currently facing a downturn in its commuter services serving Tokyo partly caused by a declining population and is looking to expand abroad. It currently provides no services outside Asia – where it is helping develop a mass transit rail system for Bangkok and improve train services in Indonesia.
The annual report says: “Generally, Japan’s declining population is seen as unfavourable for the transportation industry. However, our performance in fiscal 2015 proved that, even in an era of population decline, we can grow revenues by steadily implementing various measures.”
These include developing stations and encouraging more retired people to use local trains as the number of commuters decline.
With lower fares in Japan than the UK, the move could give the operator access to the lucrative London commuter market and it could also offer its services to maintain and build new trains for the British market.
So in other words commuters using London Midland trains to get into Birmingham and London Euston will be contributing to profits which can be repatriated to Tokyo to offset the declining Japanese market.
Which makes an investment in London Midland a one way bet for the Japanese since the current Tory government will ensure fares rise every year and the growing population in the UK will all help boost profits.
I would not be surprised to see government ministers in the transport department helping themselves to directorships and consultancies with the company a couple of years after they have stepped down from their posts. After all they have done them a great favour.
I have written about this in Tribune. The three consortia bidding are:a consortium run by London and West Midlands Railway Ltd, a subsidiary of Govia Ltd (a joint venture between Keolis and Go-Ahead Group)’ West Midlands Trains Ltd, currently a wholly owned subsidiary of Abellio Transport Group Ltd with East Japan Railway Company and Mitsui & Co Ltd as minority partners; and MTR Corporation (West Midlands) Ltd, a wholly owned subsidiary of MTR Corporation (UK) Ltd which runs the Hong Kong rail system.
The new London Midland operator will take over in October this year.