Stagecoach chief Brian Souter is considering increasing his stake in the company after its shares plunged 20% on the back of a confirmation to investors that a slowing economy is likely to affect its rail business and lead to job cuts.

Stagecoach chief Brian Souter is considering increasing his stake in the company after its shares plunged 20% on the back of a confirmation to investors that a slowing economy is likely to affect its rail business and lead to job cuts.

The Perth-based company has flagged up for some weeks that it was examining ways of making savings if the economic slowdown deepened but yesterday was its first official announcement of a cost-reduction programme in its rail business "which will include headcount reductions".

The unspecified level of cutbacks will not be confirmed until the new year when the company knows how season ticket renewals have gone and how other measures such as installing ticket barriers at a number of major stations have worked.

Souter said: "It is not going to be a slowdown, it is going to be a thumping, enormous recession."

He added: "We think there are significant and substantive cost savings that could be made across the rail business and we will be initiating that over the next few months."

He indicated that cuts at the company, which gets around 40% of revenues from rail, are likely to come from areas like marketing.

Stagecoach, which operates the South West Trains commuter route into Waterloo station, is basing its strategy on predictions that central London employment will fall by 4% over the coming months.

Souter said it was impossible to predict the impact such a drop would have on its rail revenues but he added: "In our view you cannot have a drop in central London employment of 4% without having a volume drop (in numbers travelling by rail)."

But he indicated that its Virgin Rail joint venture would not suffer cutbacks to its soon-to-be-expanded timetable.

He said: "I am not sure we would want to do that."

A beefed-up timetable with faster running times is due to come into force on December 14 with full operation due from the end of January.

This should cut average journey times between Glasgow and London by 30 minutes to four-and-a-half hours. The quickest time will drop 15 minutes to four hours 10 minutes. It will also mean an additional four trains running in either direction to bring the total each way to 13.

Souter added that the extra trains would mean "enormous numbers of discount tickets".

The chief executive indicated that the sell-off in its shares which were down by as much as 22% yesterday, meant he was considering boosting his current 26% interest in the company. "Some of us are talking about buying shares," he said.

Stagecoach shares yesterday closed at 143p, a fall of 28.3p, or 16.5%.

Blue Oar Securities analyst Douglas McNeill said: "The market is waking up somewhat belatedly to the fact that rail demand falls off in a recession."

He said that Stagecoach was particularly exposed to London commuters and the financial services industry through its ownership of South West Trains.

Stagecoach announced that over the six months ended October 31 it recorded a 27% increase in revenues to £1bn, thanks in part to the inclusion of East Midlands Trains in the numbers for the first time.

Underlying pre-tax profit was up 24.3% to £105.2m.

Souter added: "We expect that profits next year will be less but will not be significantly less."

He said the company had seen travellers targeting cheaper tickets, such as advanced fares while off-peak travel is expanding faster than rush-hour travel he said.

Asked how he viewed the expected unemployment rates to develop, Souter said: "If I could answer those questions, I would be running the country, not running Stagecoach."

After 2010 the company is protected to some extent to a fall-off in demand at South West because it enters a period of revenue sharing with the government under the terms of its franchise agreement.