Stagecoach East Coast rail franchise to end early
Stagecoach, which runs the East Coast mainline between London Kings Cross Edinburgh, which connects Yorkshire with both cities, will have its franchise on the line cut short after Transport Secretary Chris Grayling said the firm ‘got its numbers wrong.’
Grayling earlier this year said that his department was preparing contingency plans for running train services on the East Coast in the event of the existing franchise failing. Yesterday, Grayling said: “Despite delivering significant returns to the taxpayer and having some of the highest passenger satisfaction scores in the country, the lead operator of the franchise, Stagecoach, has been incurring significant losses.”
Since 2015, the franchise has met all its financial commitments to the taxpayer, returning nearly £1bn to the public purse. But this has come at a substantial cost of nearly £200 million to Stagecoach.
Grayling added: “I have already informed the House that the franchise will in due course run out of money and will not last until 2020. But it has now been confirmed the situation is much more urgent. It is now clear that this franchise will only be able to continue in its current form for a matter of a very small number of months and no more.
“Last week, following detailed analysis, my department issued the franchisee with notification that the franchise had breached a key financial covenant.
“Now, it’s important to be clear with the House, this will not impact on the railway’s day-to-day operations. The business will continue to operate as usual with no impact on services or staff on the East Coast.
“But it does mean I will need to – in the very near future – end the contract and put in place a successor arrangement to operate this railway.”
He added that passenger satisfaction is high and preparations are well under way to deliver state-of-the-art new trains on the route.
Grayling said: “The problem is that Stagecoach got its numbers wrong. It overbid and is now paying a price.
“Contrary to widespread speculation, no deal has been done and I have not yet made a decision on the successor operator to run the East Coast railway until the long-term plans for the integration of track and train can begin in 2020. There is no question of anyone receiving a bailout. Stagecoach will be held to all of its contractual obligations in full.”
Options are now being looked at “to ensure continuity of service” until the East Coast Partnership begins on the route from 2020.
Despite the overbid by Staegcoach, it will not be excluded from bidding for future franchises. Grayling also made announcements on the West Coast and East Midlands routes.
Negotiations on the West Coast Partnership have been completed and existing operator, Virgin Trains West Coast, will be awarded the contract.
Grayling added that the East Midlands franchise, which connects Sheffield to London, was to be transformed, with the biggest investment in the Midland Mainline since it was completed in 1870.
The route will see more seats, new trains and dramatically reduced journey times from Nottingham and Sheffield to London. Once complete, there will be almost twice as many seats into London St Pancras in the peak compared to today.
Abellio, Arriva, Stagecoach (the current incumbent) and a joint venture between First and Trenitalia have all been shortlisted to run the East Midlands franchise that will deliver these improved services.
Grayling added: “In a competitive market, franchises will sometimes fail. When that happens my duty is to protect passengers and taxpayers and ensure continued investment in the railway. Stagecoach has paid the price for failure as stipulated in its contract. Passengers on the East Coast Mainline can be assured that services will continue as normal. This government will undertake a transparent appraisal of the options available to ensure passengers and taxpayers are protected.”
