The UK Office of Rail and Road (ORR) has welcomed the launch of an investigation by the European Commission on the proposed merger between signalling firms Alstom and Siemens.

French company Alstom and its German competitor Siemens announced plans to merge their mobility businesses in September last year, triggering concerns among industry stakeholders about the potential impact on the signalling market.

The European Commission launched an investigation into the merger earlier this week, saying it would analyse in depth the extent to which the merger could penalise competition in Europe.

European Commissioner for Competition Margrethe Vestager said: “The Commission will investigate whether the proposed acquisition of Alstom by Siemens would deprive European rail operators of a choice of suppliers and innovative products, and lead to higher prices, which could ultimately harm the millions of Europeans who use rail transportation every day for work or leisure.”

The ORR noted that the union could have a significant detrimental impact on competition in British rail markets and pledged its support for the Commission to protect the UK’s public interest on the matter.

A merger between Alstom and Siemens would mean that the two companies would control 75% of the British rail signalling market. This share is likely to be higher in specific areas of signalling, such as interlocking.

According to estimates, the merger could lead to a rise in costs by tens of millions of pounds each year due to significantly reduced competition. Network Rail would absorb these costs, which are currently covered by taxpayers and passengers.

ORR chief executive Joanna Whittington said: “Competition in the supply chains which support Great Britain’s railway is essential if passengers and taxpayers are to receive a high-quality service at an efficient cost.”

The watchdog also warned that the merger could reduce the number of potential bidders for new rolling stock manufacturers. It cited the case of the recent HS2 rolling stock tender, valued at £2.75bn, in which Alstom and Siemens are two of the five bidders.

Whittington added: “We are concerned that the proposed merger of Siemens and Alstom will significantly reduce competition, leading to increased costs in Britain’s railway signalling and rolling stock markets. That is why we are setting out strong arguments to the European Commission and pressing for significant structural remedies to ensure competition in key railway supply chains is protected.”

The proposed merger was approved yesterday by the two companies’ shareholders with majorities of 95%. If approved, the transaction is expected to be completed in the first half of 2019.