Competition watchdog opens probe over FirstGroup and MTR's London-to-Exeter service

Rail passengers travelling between London and Exeter face higher fares and a worse service under the new holders of the South Western franchise, warned the competition watchdog.

The Competition and Markets Authority (CMA) said it has concerns over the route awarded to FirstGroup and Hong Kong's MTR by the Department for Transport in March.

This is because FirstGroup already runs the only other London-to-Exeter service as part of its existing Great Western Railway franchise.

The watchdog said it was "concerned that FirstGroup having control of both services could reduce competition on the route, leading to higher fares or worse service for passengers".

CMA acting chief executive Andrea Coscelli added: "This is a crucial rail route to the South West, used by around half a million passengers a year. It's therefore vital that passengers do not suffer as a result of reduced competition."

"The CMA believes that without its intervention, FirstGroup may be able to increase fares for passengers between London and Exeter, as it will be the only rail operator running all services on this route. We look forward to hearing from the companies involved about how they think they can overcome this."

The regulator said that unless FirstGroup and MTR provide a satisfactory solution, it will mount an in-depth probe into the agreement that could take months.

It added in previous rail cases where similar concerns had arisen, the operator had agreed to price caps on relevant routes.

The South Western seven-year franchise begins next month and covers trains between London, Bristol and Exeter, Southampton, Portsmouth and Windsor.

FirstGroup and MTR are committed to invest £1.2bn on the service, including adding 90 trains to the existing fleet.

In 2015 FirstGroup won a four-year extension to run its Great Western Railway franchise between London, the Cotswolds, South Wales and the South West.