How to invest in UK train companies

Karl 22nd Jan 2024 No Comments

Reading Time: 4 minutes

While our domestic railway network leaves a lot to be desired, it’s a fact that lush returns are possible for investors willing to buy shares in train companies.

So which train companies operating in the UK are publicly traded? And how can investors take advantage of our private railway system?

Scroll down for all of the details, or click on a link to head straight to a specific section…

The UK’s railway network

Who owns the train companies operating in the UK?

How to invest in train companies

The UK’s railway network

Let’s face it, the UK’s railway network is – to put it nicely – a shambles!

Delays, cancellations, sky-high pricing… it’s all part of the course these days for long-suffering passengers. Compare the UK’s offering to railways across Europe and you’ll be forgiven for wanting to shed a tear or two.

Despite this, however, investors shouldn’t be put off buying shares in rail firms. That’s because when companies have an incentive to prioritise profit over passengers, this can actually be a good thing for shareholders.

And, as an added boon, we shouldn’t forget that the railways are essentially a natural monopoly within a private system. This means those pesky rules of competition (you know, things like having to provide a decent standard of service) don’t really apply to the industry. Again, this can be a good thing for shareholders, as well as the big-wigs at the top, of course!

As we know, since the privatisation of British Rail between 1994-1997, most UK train companies now operate on a for-profit basis. Some train firms are limited companies, others are publicly traded, while a handful have since gone back into state ownership due to various failures.

In this article we won’t dive further into the politics of ‘Privatisation vs Public’ ownership of the railways – after all, British Rail was hardly a world leader throughout the 80s and early 90s! What we will do however, is focus our attention on how investors can take advantage of the current system we have. Like it or not, the UK railway network is likely to stay as it is for the foreseeable future. And as the old saying goes, ‘if you can’t beat ’em, why not join ’em?’

Who owns the train companies operating in the UK?

As our trains system is a deregulated free-for-all, you won’t be surprised to learn that train companies operating in the UK are owned by a mixture of public companies, foreign states, and private capital.

Here’s a breakdown of the ownership structures of a selection of train firms currently operating in the UK. (Source: weownit.org.uk)

Avanti West Coast. 70% owned by FirstGroup, 30% by Trenitalia (partly owned by Italian Government).
West Midlands Trains. 70% owned by Transport UK (owned by NS, the Dutch state railway), 15% by East Japan Railway Company, 15% by Mitsui & Co.
South Western Railway. 70% owned by FirstGroup, 30% by MTR corporation (majority-owned by the Government of Hong Kong).
Lumo. 100% owned by FirstGroup.
Northern Rail. Owned by Govia. Govia is 65% owned by Go-Ahead group which is majority owned by Kinetic Group. (Kinetic is itself owned by an Canadian pension fund, plus Spanish & Australian infrastructure firms). Meanwhile, 35% of Govia is owned by Keolis (70% owned by SNCF, the French state railway).
Hull Trains. Owned by FirstGroup.
Grand Central. Owned by Arriva* (subsidiary of German Government-owned Deutsche Bahn).
Greater Anglia. 60% owned by Transport UK, 40% by Mitsui & Co.
C2C. Owned by Trenitalia (partly owned by Italian Government).
Great Western. Owned by FirstGroup.
London Overground. Owned by Arriva* (subsidiary of German Government-owned Deutsche Bahn).
Southern Trains / Thameslink. Owned by Govia (see Northern Rail above).

*’I Squared Capital’, a private equity firm, has agreed to buy Arriva Group with the transaction expected to be completed later this year.

Train companies in public ownership

ScotRail, Welsh Railways, East Coast Mainline, Transpennine, Northern, Southeastern, and the Caledonian Sleeper are all firms currently in public ownership.

Network Rail

If you were wondering, ‘Network Rail’ owns, operates, and develops Britain’s railway infrastructure. Network Rail is Government-owned and operates as an ‘arm’s length body’ of the Department for Transport.

How to invest in train companies

If you want to invest in train companies operating in the UK, you’ll have to buy shares in a publicly-listed firm with a stake in a UK train company.

FirstGroup for instance, is publicly traded. The firm has a heavy stake (70%) in both Avanti West Coast and South Western Railway. While neither train company is likely to top any customer satisfaction surveys, FirstGroup’s share price rose 66% in 2023. In addition, the firm typically makes two divided payments per year to shareholders, with its dividend cover roughly standing at 6.4.

Meanwhile, East Japan Railway Co, which owns 15% of West Midlands Trains, is listed on the Tokyo Stock Exchange. In 2023 its share price climbed by 8%.

Mitsui & Co – another Tokyo-listed firm – also owns 15% of West Midlands Trains, plus a 40% stake in Greater Anglia. So if you want to put your capital behind either of these train companies, buying shares in Mitsui & Co will do the trick. In 2023 Mitsui & Co’s share price rose 37%.

On another note, if you don’t want to invest in UK train companies, but want general exposure to the industry, consider buying shares in firms operating within the sphere. One example is booking firm, Trainline Plc, which is listed on the London Stock Exchange.

Remember, if you want to buy shares you’ll have to first choose a suitable brokerage account. If you’re aiming to buy non-UK shares, then you’ll need to choose a platform that allows you to buy overseas shares.

To learn more about the process of buying shares, plus how to choose a suitable platform, take a look at our article that explains how to buy shares.

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