East Coast rail franchise ‘to be scrapped’ by transport secretary

Chris Grayling is expected to make a decision “within days” to end the existing East Coast rail franchise operated by Stagecoach and Virgin Trains.

The transport secretary was said to be preparing to either renationalise the London to Edinburgh line or negotiate a “not-for-profit” arrangement with Stagecoach and Virgin Trains before the end of the week.

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Grayling announced in November the franchise would be replaced in 2020, three years earlier than expected, allowing the companies to escape large payments.

Two months later, he raised the prospect with MPs of the Department for Transport (DfT) running the line. However, he also held out the possibility that the operators could continue on fresh terms.

But, according to the FT, he is now planning to scrap the franchise, the third time inless than a decade that the government has been forced to intervene.

He is thought to be more likely to choose the temporary “not-for-profit” option in the short term, given his aversion to Labour’s re-nationalisation policy.

The East Coast mainline franchise is a joint venture of Stagecoach, which owns 90%, and Virgin, which holds 10%. It was signed in 2015 but passenger numbers — and therefore revenues — have undershot expectations.

Ministers have denied that the companies are being bailed out, saying they will lose a £165m performance bond and face other penalties. Beyond 2020, the government is expected to introduce a new public-private partnership model on the line.

Virgin Trains East Coast said it had “met or exceeded” all of its contractual commitments on the East Coast line. The DfT declined to comment.