Britain’s biggest transport group is to receive about £150 million of extra cash from the taxpayer this year, as the recession bites deep into its rail operations.

Two of FirstGroup’s biggest rail franchises — First Capital Connect, which runs services through London, and First Great Western, which operates from Wales into Paddington — are receiving revenue support at the highest level of 80 per cent because of falling passenger numbers.

The extent to which the taxpayer will have to absorb FirstGroup’s falling revenues underlines the problems that rail companies have faced as a weak economy and rising unemployment have halted an extended period of growth in rail passenger numbers.

FirstGroup said that demand for services had slowed and that passengers had traded down from first-class tickets and sought cheaper advanced fares and discounted tickets.

FirstGroup, which carries 280 million rail passengers a year, said that revenue support for the first half of the year would total £76.4 million. The company said it was reasonable to suggest that such a level of support would be repeated in the second half of the year.

The financial help is made under an arrangement called “cap and collar”, devised to reduce the risk for rail operators using long-term estimates of passenger growth when bidding to run rail franchises that last for at least five years. It means that train operators share their profits during good times with the Department for Transport, but receive support when their revenues fall below a certain level.

National Express, the troubled transport group, was unable to access revenue support this year because the arrangements do not kick in until a certain number of years into the life of the franchise.

First Great Western and Hull Trains suffered declines in revenue of 0.1 per cent and 5.9 per cent respectively in the six months, while First Capital Connect (FCC), First ScotRail and First TransPennine Express all recorded growth, albeit down on March. Despite the sharp slowdown in passenger numbers in the first half of the year, the rail operations produced a 5.2 per cent increase in operating profits to £50.8 million.

Sir Moir Lockhead, chief executive, said that the market was stabilising. “British rail is levelling out now, particularly in the London commuter networks, and the trend has flattened over the last few weeks,” he said.

Group pre-tax profits fell by 44 per cent to £30.3 million in the six months to the end of September, after the company took a £100 million hit on hedged fuel costs.

Greyhound, the long-distance bus group in North America, has also had problems, with revenues down 20 per cent in the first half of the year. Sir Moir said that in the past few weeks the decline in revenues in the division had also stabilised to the “low teens”. To cut costs in the business, the company has reduced the number of buses it runs — cutting its mileage by 13 per cent in America — and reduced headcount by 17 per cent, or 1,845 posts.

US next stop

Go Ahead, London’s biggest bus operator, is following two of its rivals — First Group and National Express — into the American school bus market. The company, which also runs Southern Rail and London Midland rail companies, has signed a 50-50 joint venture with Cook-Illinois Corp. It will bid for contracts in the Chicago area, where Cook- Illinois operates 2,000 buses.

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