Edinburgh Napier University

  This paper concerns the reform of ferry services to the islands and peninsulas off the west coast of Scotland (known collectively as the Clyde and Hebrides ferry services), and the impact this has had on the economic performance of the operator. Reform was brought about by the requirement to meet European Union legislation relating to the single European market. What the paper finds is that costs and subsidy levels have risen considerably, and a high element of this can be ascribed to the increased transaction costs brought about by reorganisation. Evidence from the Norwegian and Danish ferry sectors however suggests that such services retain a strong national identity, hence competition for the market tends to be very restricted. Consequently, authorities may have to bear the transaction costs of opening up the market to conform with EU legislation, however will not gain the associated financial benefits through widespread competition that normally accompany such measures.