Contestability in the UK freight market: what are the key barriers to entry, and how can they be overcome?
Whitening, A. E.
Brewer, P. R.
This paper examines competition in the UK rail freight industry since privatisation, particularly competition from new 'open access ' operators. The first section of the paper sets out the research context, in terms of the evolution of the privatised freight railway in the UK. The research is set against the background of the economic Theory of Contestable Markets, which suggests that the likelihood of competition depends critically on the strength of barriers to entry into the market. If barriers to entry are high, then market entry strategies must centre on how such barriers can be overcome and the costs incurred in overcoming them. The paper therefore proceeds to identify the key barriers to entry and their significance, using the following approaches: a priori reasoning as to likely barriers in the light of the Theory of Contestable Markets and the inherent nature of rail freight networks and operations; findings from a survey of the UK rail freight industry on perceived entry barriers and likely methods of market entry, undertaken at the time of privatisation; case study analysis of the two UK examples of 'open access' market entry to date, concentrating on the important entry barriers in each case. These two case studies are further developed to examine how barriers to entry were overcome and how successful the entry strategies have proved to be. Similarities and contrasts between the entry strategies of the two 'open access ' operators are emphasised. Synthesis of the findings from these approaches allows some final observations to be made regarding the success or otherwise of UK rail privatisation as a catalyst for competition in the rail freight market, particularly through the emergence of new 'open access ' operators.
European Transport / Trasporti Europei
IV (1998) 10
EUT Edizioni Università di Trieste
ISTIEE Istituto per lo studio dei traspnell’integrazione economica
A.E. Whitening, P.R. Brewer "Contestability in the UK freight market: what are the key barriers to entry, and how can they be overcome?", in: European Transport / Trasporti Europei, IV (1998) 10, pp. 12-22