Rail franchises operators & contracts


Grayling due to pull the plug on East Coast franchise this week

Chris Grayling is due to scrap the East Coast franchise before the end of the week after operators Stagecoach and Virgin suffered heavy losses, it has been reported.

Two sources told the Financial Times that the DfT is set to pull the plug on the failing franchise this week, a move which would come just over three months after the transport secretary revealed it was indeed very close to collapse

Options on the table include either nationalising the line temporarily – which would be unlikely given Grayling’s track record on privatisation – or renegotiating a temporary not-for-profit management agreement with the two current operators.

He is soon expected to announce a short-term solution for the next two years.

The move would come after a difficult few months for Virgin Trains East Coast (VTEC), which itself adds to the franchise’s unfortunate history: it marks the third time a commercial franchise agreement has broken down on this part of the railway in just over 10 years.

The Transport Committee has recently launched an inquiry into the issue, while Grayling himself has been personally threatened with legal action by a campaign team backed by public law experts Leigh Day.

Just last month, the Public Accounts Committee expressed concern that the government had not learned from previous failures under the currently “broken” franchising model, and would allow Virgin to bid for other services again in future despite its failings.

Virgin owner Sir Richard Branson has also added to the debate, heaping criticism on Network Rail over what he considered to be a failure to live up to infrastructure improvement promises.

The transport secretary originally announced in November last year that the franchise was going to end three years early, with a new operator due to run under a public-private partnership likely similar to the next South Eastern model.

Grayling explained this year that the day-to-day operation of the railway would be unaffected, but confirmed that the TOC had breached a “key financial covenant” after Stagecoach “got its numbers wrong” and overbid on the original contract.

In a statement, VTEC told the Financial Times that the company believes it is “best placed to continue the transformation already underway on East Coast” and to provide a “smooth transition to the new East Coast Partnership.”

Top image: Danny Lawson, PA Images


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