Rail regulator urges increased competition in station catering

The Office of Rail and Road (ORR) has identified weaknesses in the effectiveness of the railway station catering market.

To improve value for passengers and taxpayers, the ORR advocates for increased competition in this sector. The regulator’s ongoing investigation reveals that the current market lacks competitiveness, hindering better options for passengers and station operators from investing more in the railway.

The study found that catering retailers at stations made around £700m in revenue in 2022/23. Station operators, including Network Rail and train operators, earned slightly over £100m from leasing outlets for catering services during the same period.

The report also highlights that extended leases, with around 24% of station outlets protected by ‘protected’ leases under Part II of the Landlord and Tenant Act 1954, contribute to outlets remaining in the same hands for prolonged periods. Station operators, lacking no incentives, are not inclined to introduce competition for outlets.

Even when unprotected leases come up for renewal, the normal practice is to roll over or extend them without an open competition. Notably, almost half of all stations (47%) with retail space have only one outlet.

These market weaknesses also limit station operators’ income, reducing their capacity to invest in station and service improvements, thereby increasing reliance on taxpayer support.

Furthermore, the ORR’s report indicates that the characteristics of the railway station catering market may lead to an average 10% price premium at stations compared to high street prices.

As the investigation continues, the next phase will concentrate on formulating recommendations for the government, station operators, funders, and other stakeholders to improve the market’s functionality.

Will Godfrey, director of economics, finance and markets, said: “The railway station catering market isn’t working as effectively as it should be. More competition between companies to operate at stations would bring real benefits to passengers and taxpayers.

“Because money earned from leases at stations ultimately makes its way back to those who operate railway stations and infrastructure, this is money that could be invested in improving services for passengers or reducing the need for taxpayer support. We will now work with the industry on the best way forward and will make recommendations on how the market needs to change, with the ultimate goal of improving value and outcomes for customers and funders of the railway.”