The Competition and Markets Authority accepted the plan following an in-depth investigation into the UK rail signaling market.

The watchdog previously said the tie-up could harm competition because both businesses were leading suppliers of signalling for mainline and urban railways, along with Siemens and Alstom.

The CMA warned that Thales and Hitachi were both well-placed to supply these systems and that, should the merger go ahead, few credible competitors would remain.

In response to the concerns, Hitachi will sell its existing mainline signalling business in the UK, France, and Germany.

Hitachi will need to approve the purchaser and transfer of the relevant signalling contracts with its clients in impacted countries.

Stuart McIntosh, chair of the CMA’s independent Inquiry Group, said:  “Effective signalling is vital for safe and reliable rail travel, which is why it has been important for us to review this merger thoroughly before reaching a final decision.

“We have concluded that the merger will not reduce competition to provide CBTC signalling systems, and in particular those required on the underground network in London.

“The picture is not the same for digital mainline signalling.

“To address our concerns here, Hitachi is selling part of its existing mainline signalling business to an independent purchaser. This will protect competition, which is key to keeping costs down, maintaining high quality of service and promoting innovation.”