Perth-based bus and rail company Stagecoach has confirmed it is drawing up cost-cutting plans as transport businesses, previously seen as insulated from a downturn, begin considering the impact of an unexpectedly long and deep recession on the sector.

Perth-based bus and rail company Stagecoach has confirmed it is drawing up cost-cutting plans as transport businesses, previously seen as insulated from a downturn, begin considering the impact of an unexpectedly long and deep recession on the sector.

Stagecoach has started identifying "soft costs" in the business, chief executive Brian Souter said, which could be trimmed if the company came under pressure. Several rivals including Go-Ahead, owner of the Gatwick Express, are also thought to have constructed contingency plans for a downturn.

Souter is adamant the company, which claims 14% of the UK bus market and 25% of rail, is benefiting from a "modal shift" from cars to public transport, in particular buses.

But he admits the company is seeing a slowing of revenue growth on commuter rail routes, notably into London where it runs the South West franchise operating out of Waterloo station. It is also on a short-list to pick up the Southern franchise which runs into the capital.

These routes are most vulnerable to rising job losses in the City.

But the company, which has 30,000 employees, believes that in hard times, and Souter maintains it would have to be a "depression not a recession" for Stagecoach to get hurt, it could shave costs.

Cutbacks on off-peak services and marketing costs are among those that Souter believes he could look at if spiralling unemployment hits revenues.

Panmure Gordon analyst Gert Zonneveld says that rail businesses are fairly constrained in their costs with around half coming from track access charges and rolling stock costs, which cannot be easily reduced.

Around another quarter of costs come from its wage bill but the length of time it takes to train drivers restricts the company's ability to axe posts.

Stagecoach is already facing some employee unrest in its bus business. In the north-east of Scotland 500 staff, including bus drivers, mechanics and cleaners, are balloting on industrial action after rejecting a 4% pay offer.

Zonneveld said of the rail business: "What you may do is make some timetable changes if you can. You may also look at marketing spend."

But he emphasised that "conditions remain fairly good" with high fuel prices, the introduction of congestion charges and environmental concerns encouraging people to switch from cars to public transport, particularly buses.

Meanwhile, Stagecoach has indicated it will not be promoting the expanded timetable being adopted on the west coast main line between Glasgow and London in the New Year because it is worried about track operator Network Rail's ability to cope.

Changes on the route, which is operated by Virgin Trains in which Stagecoach has a 49% stake, should cut journey times between Glasgow and London by 30 minutes to four-and-a-half hours, and mean an additional four trains running in either direction to take the total to 13.

Stagecoach is content that around 95% of the infrastructure is in place for the upgrade but is concerned that levels of disruption currently being experienced on the route could mean a massive drop in performance when more trains starts running.

Zonneveld said: "The reason why they are not marketing this more than we would expect is that there are some question marks as to whether Network Rail can deliver this particular infrastructure improvement on time and whether they can cope with the increased frequency of services."

He said that Stagecoach would be financially compensated for service disruptions. But he added: "They do not want to look silly by announcing this wonderful upgrade if there are problems."

The west coast line was hit by work over-runs last New Year that resulted in Network Rail being hit with a £14m fine.

Stagecoach shares closed up 3.5p, or 1.5%, yesterday at 240p, around 16% down from the start of the year.