The Times, 16 September 2015, Alex Ralph

Concerns about the cost of the new living wage caught up with Stagecoach yesterday as investors alighted after bearish broker comments.

Shares in Stagecoach were among the biggest fallers across the FTSE 350 after analysts at Investec told investors to sell the stock following a wide-ranging review of the bus and rail market.

Running the numbers, Investec said that the market was assuming an unrealistically high share of the future UK rail market for Stagecoach. It also found that the living wage would hit margins most in the regional bus market, where wage levels are generally lower and Stagecoach has the greatest exposure, with an estimated 20,075 staff. That compared with Go-Ahead, its rival, with 6,800. Investec said that Stagecoach’s margins could be hit the most by the living wage, by between £24 million and £47 million.

Alex Paterson, an analyst at Investec, argued that “lower fuel prices will help partially to mitigate it, but we do not believe the likely increase to labour costs can be fully passed on through higher fares in the short term”.

Shares in Stagecoach tumbled 9½p to 345¼p, underperforming a wider London stock market that shrugged off losses earlier in the session to close in positive territory.