When new entrants like Uber joined the taxi market there were fears for the future of buses. But figures suggest that the arrival of the age of the smartphone app age has simply served to intensify competition for the same volume of travel

 

 
There is little or no evidence of an increase in taxi and private hire use since the introduction of new services such as Uber and Lyft, according to new analysis undertaken by Passenger Transport Monitor (PTM) as part of research for their new report The Bus Demand Jigsaw 2020.

Given the explosion in numbers of licensed drivers and vehicles over the last decade or so, the firm says that this continues to be a surprise. It conflicts with a wide expectation in the industry that the new services offer a competitive threat to other public transport modes, especially buses.

This is the third time PTM has done this analysis, which is based on a methodology used by the competition authorities and the Law Commission when studying the industry (statistics on taxi use are not kept by the Department for Transport). Thus, in 2003, the Office of Fair Trading estimated the size of market to be £2.2bn a year. The Law Commission’s 2014 report used a similar methodology and estimated the size of the domestic taxi market to be £2.72bn a year in 2012. In both cases the figures were derived from the Office for National Statistics Household Expenditure Survey. However, this means that it excludes spending by business, incoming tourists and public sector bodies such as health, social and education services. Using the same methodology as the Law Commission, PTM estimates the size of the market to have grown to £2.9bn a year in 2017 at constant prices.

An alternative approach is surveys which identify people’s travel habits, such as the Department for Transport’s annual National Travel Survey (NTS) and the Scottish Household Survey. The NTS uses a large (15,000 plus) sample of people across the country to track changes in how, why and when people travel. The 2018 survey, published last summer, shows that the number of journeys per person per year by taxi and PHV has actually fallen since the turn of the century, with use peaking at 12 trips per person per year then, before falling slightly to around 11 in the run-up to the 2008 financial crash. By 2011/2012 , it had recovered to just above 10, but has stayed steady around that number ever since, falling to 9.8 in 2017/18. In Scotland, the Household Survey suggests that taxi and PHV use constitutes around 1.4% of all travel.

Multiplying these trip rates up by the total population in England, PTM suggests a trip volume of around 546 million in 2018, with a further 62 million in Scotland. Estimates for Wales suggest a further 22 million trips. Data from the International Passenger Survey suggests that incoming tourists may account for a further 40 million trips a year.

These patronage and expenditure figures together suggest that the average revenue per trip would be around £5.20 to £5.40.

These figures are fascinating and suggest that … the arrival of the age of the smartphone app age has simply served to intensify competition for the same volume of travel

Commenting on the findings, report author Chris Cheek said: “These figures are fascinating and suggest that, as some established taxi and private hire firms have previously claimed, the arrival of the age of the smartphone app age has simply served to intensify competition for the same volume of travel. This has driven real-term income down for all the players in the market.”

If this was correct, he continued, there had been benefits to existing consumers who may have saved money, but people do not seem to have responded by expanding their use of the services.

“As with all forms of transport, the future of the taxi and private hire business in a post COVID-19 world looks highly uncertain,” Cheek said, “especially given the scrutiny which operators such as Uber and Lyft have come under from regulatory authorities round the world, most recently in California.

“The technology has, rightly, been praised by consumers and the business model is a clever one – but if this evidence is correct, and there has been no increase in the total market for the product as a result, then the future does not look bright for the concept.”

 
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