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FirstGroup to invest 78 million pounds for growth in British bus business

LONDON (Reuters) - British transport company FirstGroup is to invest 78 million pounds in 385 new buses, upgrading its fleet in an effort to maintain growth at its UK bus division after a series of setbacks in its rail unit.

FirstGroup's UK train business suffered a heavy blow last year when it failed to win contracts to continue running three rail networks and also lost out on bids for new contracts.

The bus division, however, is on course for continued growth, said Giles Fearnley, managing director of the First Bus unit in Britain. With the company's new investment and other modernisation measures, Fearnley expects the company to be able to sustain its annual 1 percent growth in passenger numbers.

"We firmly believe we can continue to grow the passenger base as we have done now for the past two and a bit years," Fearnley told Reuters.

The UK bus business accounted for about 16 percent of FirstGroup's total operating profit in the 12 months to March 31 last year, against 21 percent from the UK rail operation.

Britons take 5.2 billion bus journeys a year, more than three times the number of rail journeys, according to Britain's Department for Transport, and Fearnley said First Bus can boost numbers further with its strategy of lowering fares, improving routes and introducing more modern wifi-enabled vehicles.

The company is working with authorities in many of its areas to introduce information and tracking systems to tell people at bus stops when the next service is due.

"It's all about confidence. We stimulate demand by giving confidence," Fearnley said.

FirstGroup, which also runs yellow school buses in the United States, operates about 20 percent of Britain's bus market outside London, running services in cities such as Bristol, Bradford, Southampton and Leicester.

(Reporting by Sarah Young; Editing by David Goodman)