The Competition and Markets Authority said it was concerned that the deal will reduce much-needed additional competition for rail signalling supply just as major contracts are coming up for tender.
On HS2, the firms make up two of the four shortlisted bidders for the £540m job to design and buildsignalling systems that will control trains travelling at speeds of up to 360km/h and up to 25 years of technical support.
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It added that the loss of competition across both mainline and urban signalling markets could increase costs for Network Rail and TfL and have an adverse knock-on effect on taxpayers and passengers.
Colin Raftery, Senior Mergers Director at the CMA, said: “Network Rail currently spends close to £1bn annually on mainline rail signalling – and this is expected to increase in future, as equipment needs to be replaced and the UK transitions to digital signalling.
“The cost of signalling, and