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The UK bus market needs to be opened up to new firms as too many operators face little competition, the Competition Commission has said.

The commission said many passengers who are dependent on bus services in local areas faced less frequent services and, in some cases, higher fares, than in areas where there was more competition.

The trade association for buses said there was "room for improvement".

The commission's report did not include London or Northern Ireland.

There are 1,245 bus companies in England, Scotland and Wales.

'Bus wars'

The commission said the five largest bus operators - Arriva, FirstGroup, Go-Ahead, National Express and Stagecoach - provided 69% of local bus services in the whole reference area.

"There are a large number of towns and cities where bus operators face limited competition and little prospect of significant change," said Jeremy Peat, chairman of the Local Buses Inquiry Group at the Competition Commission.

"In a market that was deregulated in anticipation of widespread competition that is clearly a problem and there are evident risks of disadvantages for passengers when there is little to keep local operators on their toes."

He added that head-to-head rivalry could be unstable in the bus market, with such head-to-heads on particular routes resulting in short-lived "bus wars".

Simon Posner, chief executive of the Confederation of Passenger Transport, said: "Importantly for our customers, the report confirms that even where there is a dominant operator, our fares are reasonable.

"However, there is always room for improvement and, while this is only a preliminary report, the industry looks forward to working with the commission to identify ways to improve services for passengers."

The Competition Commission is now consulting on measures to open up more markets by tackling the factors that can hinder competition.

It is also seeking views on "whether Local Transport Authorities should take measures to encourage competition, including whether franchising (where operators would compete for the right to provide services) might be required in cases where there has been a particularly marked failure of competition".