Concern has been raised about the future viability of the UK bus industry, following research which shows that industry profit levels have fallen again, to their lowest levels since 1993.

The analysis, based on the results of over 130 bus companies around the country, is from the latest Bus Industry Monitor report by Preston-based consultants TAS. The data shows that pre-tax profit margins in 2005/06 fell back to 6.6% from 7.2%.

"This is the seventh fall in eight years," said the report's editor, Chris Cheek, "and if current trends continue, the industry will go into the red in the foreseeable future."

One in seven of the companies analysed in the report is already in the red. Nineteen of the companies made an operating loss, up from 14 the previous year.

Profits fell in all areas of the country except London, and are particularly low in the English Shires (where margins have fallen to 3.9%) and Wales (3%).

Companies operating in the big regional cities earned the highest pre-tax margins in 2005/06 (8.4%, down from 10.3%) and in Scotland (8.3%, down from 10.5%).

According to TAS, the explanation for the fall in profits lies primarily in increased operating costs, caused by rising fuel prices, increased wages and higher pension contributions - and slower and less efficient schedules as traffic congestion grows. Operating costs rose by over 9% during the period under review, with unit labour costs rising by an average of 4.4%.

"Companies actually did rather well at growing their revenue: it rose by over 8%, thanks to increased passenger volumes and fare rises," Cheek explained, "but the revenue growth was swamped by these rises in costs."

Modelling work done by TAS shows that for each 1% change in bus speeds, bus operating costs rise or fall by 0.8%. According to government figures, average traffic speeds in urban areas fell by 4% between 2004 and 2006.

"We reckon, therefore, that this drove costs up by over 3% - on top of the rise in wage rates and diesel prices," added Cheek.

"As services get slower, it takes more resources to provide the same frequency," he explained. "This is not sustainable, and people in local authorities and bus companies really do have to get together and act decisively to increase bus speeds."

Arriva's Derby operation was the most profitable bus company in Britain in 2005/06, although the position is slightly false since the company's overhead costs are borne elsewhere. Second came Transdev-owned Yorkshire Coastliner, with a pre-tax profit margin of 24.6%. Third came Wellglade subsidiary Barton Buses on 20.8%. Fourth was National Express Group subsidiary Travel Dundee on 16.7%. Fifth was NEGÕs Travel West Midlands on 16.4%.

The worst performing company (for the sixth year in a row) was NEG's Travel London (formerly Connex) with a 64.1% loss margin, followed by Arriva Colchester (34.4%). Next came Arriva Kent & Sussex (30.3%), ComfortDelGro's subsidiary Armchair (15.9%) and First Devon and Cornwall (9.7%).