This is certainly a bold move in a sector that has poorly served consumers for too

This is certainly a bold move in a sector that has poorly served consumers for too long. But it certainly wasn't expecting this perennial stock market struggler to announce a hell for leather expansion in convenience stores, opening 200 Sainsbury's Locals in three years with plans for an astonishing 1,000 in the longer term. The purchase will raise FirstGroup's debt levels to pounds 850m but the company said it would be earnings enhancing immediately before goodwill write-down.Trevor Smallwood, FirstGroup chairman, said it aimed to expand by acquiring other privately-owned school bus operators. The US school bus market is worth $14bn and there are 5,000 private operators.Outlook, page 17. THE STOCK market was expecting more bad news from Sainsbury's yesterday and duly got it.

They were also growing quickly because of the second US baby boom, which has led to a huge increase in school student numbers, and the shift to private contracting by state school boards.Last year the Cincinatti-based RPTS made operating profits of $62m on sales of $582m. It has a market share of around 3 per cent, compared with 9 per cent for the biggest US school bus operator, Laidlaw.In addition, RPTS has a public transport contracting business, which provides services ranging from management to supply of bus drivers to 30 different states, and a fleet maintenance business.FirstGroup's chief executive, Moir Lockhead, said the three markets served by RPTS had annual revenues of $25bn. First Group shares rose 9.5p to 333p. The deal will increase the turnover of FirstGroup, which also operates three UK rail franchises, by 25 per cent and give it a significant presence in the US public transport market.RPTS, part of the huge Ryder logistics and truck leasing group, has a fleet of 11,000 yellow school buses and transports 650,000 students a day in 25 states. The purchase of Ryder Public Transportation Services (RPTS) will be part funded by a one-for-four rights issue at 275p to raise pounds 238m and is likely to be followed by further bolt-on acquisitions of other school bus operators. BRITAIN'S LARGEST bus company, FirstGroup, yesterday made its first major overseas move, agreeing to pay pounds 602m for America's second largest school bus operator. That dispute has been resolved, but it has left a sour taste.The suspicions that Mr Cruickshank is working to a specific agenda have been fanned by talk within banking circles that some of the consultants' reports have been sent back after failing to come up with the right conclusion..

What we fear is that he will keep looking until he finds something."The big clearing banks complain that they are still being kept in the dark about the objectives of the Cruickshank review despite being bombarded with requests for information, much of it highly sensitive and costly to collate with little explanation about the use to which it is to be put.The concerns have emerged as Mr Cruickshank prepares to deliver a progress report to the Treasury today, in which he is expected to call for the new Financial Services Authority to take a more pro-active role in ensuring that banking regulations which act as an unnecessary barrier to competition are scrapped.Some banks have also been alarmed to hear Mr Cruickshank express the view that the many detailed prudential requirements and money laundering regulations to which banks are subject are a key reason why products such as mortgages and current accounts are similar across the sector and ought to be scrapped.However, he is understood to have come under strong pressure from both the Treasury and Howard Davies, the FSA chairman, to drop a recommendation that the new financial services watchdog be given a remit to promote competition within the banking and insurance sector and refocus his attention back on the banks themselves.At least one major clearing bank was refusing until two weeks ago to provide information to Mr Cruickshank's staff because of concerns about potential breaches of client confidentiality. Our belief is that we have nothing to fear from a truly objective review of the industry. "But we are starting to wonder whether it really will be objective. One banker said yesterday: "We wanted to cooperate and we still want to cooperate. CONCERN IS mounting among Britain's leading banks about the increasingly hostile nature of the inquiry into the sector by Don Cruickshank, the former telecoms regulator, with a number of senior bankers privately expressing fears that the exercise risks degenerating into a bank bashing crusade. The water companies will receive details of his draft determinations next Monday evening The new price limits will be published the following day. The companies will then have until October to make representations following which the final price determinations will by published in November.Ministers had been concerned that consumers would be confused by a big one-off cut in water charges followed by steadily rising bills. The industry and the Environment Agency have also argued that, given the choice, consumers would be happy to see bills staying more or less constant or rising slightly, provided the money was spent on improved services.But Mr Byatt, who retires next summer, has decided to stick to his guns and deliver a price review which both cuts bills and improves water quality.Outlook, page 17.

A one-off reduction of 15 per cent means we will have to cut either customer service levels, investment programmes or the dividend."Mr Byatt is thought to have briefed ministers in the last few days on his decision. One senior industry figure said: "Byatt's decisions are set in stone and it looks like he is going to be tough. Its alternative scenario is for a one-off cut averaging 9 per cent, followed by a reduction in bills of 1 per cent in real terms in the subsequent four years.In recent days, the industry itself has become increasingly resigned to a harsh price review. HOUSEHOLD WATER bills are to be slashed by pounds 1bn next week, a saving of around pounds 35 a year for the average domestic customer. The water regulator, Ian Byatt, is understood to have largely ignored the pleas of the industry and decided to go ahead with one-off price cuts of around 15 per cent in April 2000. The size of the reduction could force a number of water companies to go to the Competition Commission arguing that the industry will not be able to afford its pounds 8.5bn programme of environmental improvements.City analysts expect the one-off cut to be followed by tough price curbs in the next four years, which will only allow companies to raise prices by between 1 and 2.5 per cent in real terms.Mr Byatt, the head of Ofwat, is understood to have concluded that falling interest rates and increased efficiencies mean that the water companies can still deliver environmental improvements at the same time as cutting bills significantly.In his Prospects for Prices consultation paper last October, he proposed cutting the average pounds 245 household bill by 15-20 per cent and set a cost of capital for the industry in the range of 4 per cent to 5.5 per cent.Although the size of the environmental programme - mainly improvements to drinking water quality and cleaning up coastal discharges - has grown since then, Mr Byatt believes it can be met at no extra cost.Robert Miller Bakewell, utilities analyst at Merrill Lynch, said: "If you look at how Byatt has behaved in the past then he is very reluctant to give ground once he has laid out his position."Merrill Lynch believes the most likely outcome is a one-off cut of 15 per cent or more next April, reducing revenues by pounds 1bn.

But they said the currency would have to pull further away from parity at least until the autumn before they could be confident it was out of danger.Against the pound, the euro rose to 66.78 pence, its highest since 15 April. "Euro/sterling is at the moment a function of euro/dollar," said Michael Metcalfe of NatWest Global Markets.. She said the euro would stick around the the $1.05 mark for some months before attempting a climb towards $1.08. The euro was launched on 1 January at about $1.17.A poll of City economists by Reuters found that odds of the euro avoiding parity had risen from one-third to two-thirds. While the gains of the last few days have been driven by positive sentiment on euroland, a shock from the US - such as an inflation warning from Alan Greenspan, chairman of the US Federal Reserve, in today's Humphrey-Hawkins testimony to Congress - could spike up the dollar.Ms Cottrell said the surge in the euro was not a "blip" as there had been a fundamental change within the euroland economy, but warned it could suffer another fall and risk hitting $1. A break above $1.0558 would take the euro to its highest level in two months. The currency also surged to a three-month high against the pound as enthusiasm for the European currency outweighed fresh evidence UK rates may have troughed. Demand for euros has risen sharply following the stronger than expected German IFO survey of business confidence, which confirmed euroland's economy is picking up.