World News

Government strips Stagecoach of Virgin East Coast franchise

Government strips Stagecoach of Virgin East Coast franchise

Control will pass in June to the "operator of last resort" - an Arup-led group contracted on the government's behalf.

Transport secretary Chris Grayling's decision was surprising given his vehement opposition to public control of rail.

He will then appoint an "operator of last resort" to run the train services on the line.

It is the third time in a just over a decade that the government has called a halt to the East Coast franchise.

Stagecoach and Virgin were supposed to run services on the line until 2013, but the government had previously agreed to let them walk away from the agreement three years early.

Grayling said that the scrapping of the contract did not mean that government had lost out, because East Coast had already delivered 1 billion pounds to the public purse, and continued to generate returns, plus passenger satisfaction was high.

The Government announced yesterday it will temporarily renationalise the beleaguered East Coast rail franchise, once again raising the argument over whether Britain's trains should be public or privately owned.

He expected the majority of the enhanced services planned by Virgin and Stagecoach for delivery by 2023 to be implemented by LNER, although this would largely depend on the ability of infrastructure manager Network Rail to deliver them.

More news: Weekly Admiral Group plc (LON:ADM) Ratings

It comes after operators Virgin and Sir Brian Souter's Stagecoach could no longer meet the promised payments in the £3.3bn contract.

Stagecoach CEO Martin Griffiths today said the company was surprised and disappointed in the DfT's decision to terminate its deal but respects it nonetheless.

This transfer could also see Transport for London incorporate more shorter-distance routes into its London Overground operation.

Anthony Smith, chief executive of the independent watchdog Transport Focus, said: "Whichever organisation runs East Coast services, under whatever new arrangements, passengers will be looking for the quality of current services to be maintained and built on".

Mr Grayling told parliament that Stagecoach and Virgin have lost nearly £200m, but that this had not been a loss to taxpayers "at this time".

Grayling said: "On that same day we will start with the launch of the new, long-term brand for the East Coast Mainline through the recreation of one of Britain's iconic rail brands, the London North Eastern Railway (LNER)".

GNER, which run the route from 1996, collapsed in 2007 and the franchise was taken over by National Express before the government announced it was establishing a publicly owned company to take over the franchise from 2009.

McDonald pointed out that the government had failed to impose restrictions on what Virgin and Stagecoach could do next, calling the statement "a smokescreen to divert attention from the failings of his policy".


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