05.01.18
Branson heaps major criticism on NR for end of East Coast franchise
Sir Richard Branson has hit out at Network Rail after the decision to end the Virgin Trains East Coast franchise in 2020 was heavily criticised, with some commentators referring to it as a ‘bailout.’
The Virgin founder said ending the franchise early was a “pragmatic solution” after Network Rail allegedly failed to live up to major promises it had made on infrastructure improvements.
Transport secretary Chris Grayling has come under heavy scrutiny since the decision in December to bring forward the renewal date of East Coast by three years, with critics calling the move a ‘bailout’ because the £3.3bn total that the operator had pledged to give to the government over the entire term would be cut short.
Branson confirmed that the figure was correct, but said that the move was not bringing benefits to either Stagecoach – which owns 90% of the JV – or Virgin. In fact, he claimed that the two parties would be losing more than £100m and had received no dividends.
But the decision to “swallow those losses and simply walk away from the franchise as others have done before” would be wrong, the Virgin boss claimed, and would cause an “abrupt halt to the investment and improvements which are flowing into East Coast.”
Writing about the original franchise bid and alleged upgrade delays, he argued: “That bid was based on a number of key assumptions and a promise of a huge upgrade of the infrastructure by Network Rail that would have improved the reliability of the track and allowed us to run more trains and carry many more passengers than we do today.
“The considerable delays to this upgrade, to new trains, as well as poor track reliability will cost us significant lost revenue (amounting to hundreds of millions of pounds) and torpedoed the assumptions of our original bid.
“As the facts became clear about these issues – (as well as a drop in Britain’s GDP growth) - a discussion with government had to take place and a pragmatic solution was needed to keep delivering improvements and investment in the line.”
Meg Hillier, head of the Public Accounts Committee, said last month that she would be looking into the decision and would potentially bring Grayling and the DfT under investigation for the unusual move.
When a new operator is chosen for the service in 2020, it is expected to run under the public-private ‘East Coast Partnership’ likely to be similar to the model announced for the next South Eastern franchise.
The decision is the first major development on news from June this year that Stagecoach had taken an 80% hit to its profits because of its troublesome dealings with the franchise.
Top image: David Davies
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