The East Coast Mainline rail service will be brought back under public control after the troubled franchise agreement with Virgin Trains was terminated, it has been announced.
In a stock market statement – ahead of an announcement by transport secretary Chris Grayling in Parliament – Stagecoach Group chief executive Martin Griffiths, said: “We are surprised and disappointed that the Department for Transport has chosen not to go ahead with our proposals.
“We believe our plans offered a positive, value-for-money way forward for passengers, taxpayers and local communities, ensuring the continuation of the exciting transformation already under way on East Coast and a smooth transition to the Government’s new East Coast Partnership.
East Coast rail line: demand for re-nationalisation as franchise fails
“However, we respect the Government’s decision. We will work constructively with the DfT and the OLR in the weeks ahead to ensure a professional transfer to the new arrangements, supporting our employees and maintaining the same clear focus on our customers as we have over the past three years.
The East coast rail line will be temporarily renationalised, the government has decided, after operators Virgin and Stagecoach could no longer meet the promised payments in the £3.3bn contract.
The London to Edinburgh service will be taken back into public control, a little over three years since Virgin Trains East Coast started running.
Ahead of an expected statement by the transport secretary, Chris Grayling, to the House of Commons, Stagecoach announced that it had been advised he planned to appoint the “operator of last resort” – an Arup-led group under government control – to run the service.
Grayling announced in November that the East Coast franchise would be terminated three years early in 2020, allowing the operators to avoid up to £2bn in payments until 2023. Lower passenger numbers and revenue than forecast have seen Stagecoach losing around £200m on the franchise to date.
“Today’s decision should not detract from the hard work and dedication of our people at Virgin Trains East Coast, who have been central to the transformation we have been delivering for our customers over the past three years. During that time, we have attracted more passengers, greatly increased investment, achieved industry leading customer satisfaction and made significant payments to the taxpayer to reinvest in public services.
“Despite today’s news, we believe that we can continue to make a positive contribution to the UK rail market, delivering long-term customer benefits and sustainable returns for taxpayers and investors.”
Shadow transport secretary Andy McDonald had earlier tweeted: “Transport Secretary Chris Grayling is due to make a Statement on his taxpayer bailout of Virgin/Stagecoach on the East Coast but has refused to share it with me in advance. He is breaking the Ministerial code to prevent the Govt calamitous rail policies being scrutinised.”
Outrage over Virgin Trains’ West Coast contract after its losses on East Coast line could see it renationalised
Transport secretary Chris Grayling said he may set up a state-backed operator.
He said it was “running out of money”.