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Virgin trains will vanish from UK after ban on Stagecoach's bids Branson: Virgin trains will vanish from UK after Stagecoach ban
(about 5 hours later)
Virgin trains will disappear from Britain’s railways within 12 months after the government blocked the operator from renewing its west coast franchise. Sir Richard Branson has said Virgin trains could disappear from Britain’s railways by the end of the year after more than two decades following the government’s decision to block the renewal of its West Coast franchise.
The Department for Transport has barred Stagecoach, the joint venture partner for Virgin, from bidding for three new rail franchises amid a furious row about pensions. The Department for Transport has barred Stagecoach, Virgin’s joint venture partner, from bidding for three new franchises – including West Coast – in a row over rail staff pensions.
Virgin trains have run on the west coast franchise for more than 20 years, but the joint venture with Stagecoach will cease to exist on 31 March 2020, when a new franchisee will take over. Virgin Group, founded by Richard Branson, owns 51% of the company, while Stagecoach owns 49%. “I received the news this morning that the Department for Transport (DfT) has decided to disqualify our bid for the West Coast Partnership,” Branson wrote in a blog on the Virgin website. “This means that Virgin Trains could be gone from the UK in November.”
A new franchise for the west coast line, which runs from London to Glasgow, is due to be awarded in June, but Stagecoach said it had been informed that its bids were not compliant with the government’s terms. Virgin’s trains have run on the London to Glasgow line for 22 years but its joint venture with Stagecoach is due to expire on 31 March 2020 at the latest. The government is to award the next franchise this June and, if the winning operator says it can start running a service by November, the handover would be brought forward.
Last year Virgin started a separate rail business in the US, but the government’s decision means it will no longer have a presence on British railways unless it wins another franchise in the future. A spokeswoman for Virgin declined to comment on whether the company had plans to bid for future franchises. Stagecoach said it had been informed that its bids were not compliant with the government’s terms, triggering an outpouring from its longstanding partner on the West Coast route.
“I am devastated for the teams who have worked tirelessly to make Virgin Trains one of the best train companies in the UK, if not the world,” Branson wrote.
“We’re baffled why the DfT did not tell us that we would be disqualified or even discuss the issue,” he added, referring to a dispute between Stagecoach and the government over how much of rail staff pension liabilities the company is willing to share. “They have known about this qualification in our bid on pensions for months.”
Virgin Group, founded by Branson, owns 51% of Virgin Trains, while Stagecoach owns 49%.
Last year, Virgin started a separate rail business in the US. A spokeswoman for Virgin declined to comment on whether the company had plans to bid for future franchises in the UK.
In a statement, Virgin Trains said: “We’re very disappointed by the DfT’s unexpected decision. We’re studying the DfT’s decision carefully to understand why they’ve taken this action and would like to reassure all our customers that they can still book and travel as normal.”In a statement, Virgin Trains said: “We’re very disappointed by the DfT’s unexpected decision. We’re studying the DfT’s decision carefully to understand why they’ve taken this action and would like to reassure all our customers that they can still book and travel as normal.”
The transport secretary, Chris Grayling, has also been forced to further delay the award of its south eastern franchise at least until November, in a written ministerial statement on Wednesday, in another blow to his department. As part of the DfT ruling, Stagecoach was also blocked from renewing the East Midlands rail franchise, which it has run since 2007. Stagecoach’s bid for the South Eastern franchise was also blocked. The decisions follow another dramatic move last year when the DfT was forced to step in to run the East Coast franchise, after Virgin Trains admitted it could not keep up with payments to the government under its contract.
The announcement represented a blow to Stagecoach, whose rail business in the UK faces uncertainty. The FTSE 250-listed group will be removed from the east Midlands rail franchise, which it has run since 2007. The Dutch state-owned operator Abellio will take over in August for the next eight years. Its bid for the south eastern franchise was also blocked, and the government was last year forced to step in to run the East Coast franchise.
Sadiq Khan pushes for tube-style services on London's railwaysSadiq Khan pushes for tube-style services on London's railways
Stagecoach could choose to exit the rail industry entirely after the DfT’s “unprecedented” decision, said Gerald Khoo, an analyst at Liberum, an investment bank. The government’s row with Stagecoach centres on a big deficit in the Railways Pension Scheme. The Pensions Regulator has said up to £6bn may be needed to plug the gap, but the train companies have insisted that the government should support the scheme.
The government’s row with Stagecoach centres on a big deficit in the railways pension scheme. The Pensions Regulator has said up to £6bn may be needed to plug the gap, but the train companies have insisted the government should support the scheme. Stagecoach said the private sector should not be expected to bear long-term funding risks for parts of the Railways Pension Scheme, which invests more than £20bn for railway employees.
Stagecoach said the private sector should not be expected to bear long-term funding risks for parts of the railways pension scheme, which invests more than £20bn for railway employees. Branson said: “The Pensions Regulator has warned that more cash will be needed in the future, but no one knows how big that bill might eventually be and no responsible company could take that risk with pensions.
“We can’t accept a risk we can’t manage – this would have been reckless. This is an industry-wide issue and forcing rail companies to take these risks could lead to the failure of more rail franchises.”
Martin Griffiths, Stagecoach Group’s chief executive, said he was shocked that the government had rejected its bid and he was heavily critical of the DfT’s process.Martin Griffiths, Stagecoach Group’s chief executive, said he was shocked that the government had rejected its bid and he was heavily critical of the DfT’s process.
He said he was seeking an urgent meeting with the DfT to discuss the bid, with Stagecoach management only informed that they had been disqualified in a phone call from a civil servant late on Tuesday.He said he was seeking an urgent meeting with the DfT to discuss the bid, with Stagecoach management only informed that they had been disqualified in a phone call from a civil servant late on Tuesday.
Griffiths said: “We are […] extremely surprised that the government still expects private operators to take risks they are not best placed to manage, despite the recent difficulties experienced by a number of operators of outsourced public sector contracts.” Griffiths said: “We are … extremely surprised that the government still expects private operators to take risks they are not best placed to manage, despite the recent difficulties experienced by a number of operators of outsourced public sector contracts.”
A spokesman for Stagecoach accused the DfT of “reckless government policy” that could put rail operators out of business. However, the government hit back, saying Stagecoach was responsible for its disqualification.
However, the government hit back, saying Stagecoach was responsible for its disqualification. Abellio’s bid was compliant with the terms of the invitation to tender, the DfT said.
A DfT spokesman said: “It is entirely for Stagecoach and their bidding partners to explain why they decided to repeatedly ignore established rules by rejecting the commercial terms on offer.”A DfT spokesman said: “It is entirely for Stagecoach and their bidding partners to explain why they decided to repeatedly ignore established rules by rejecting the commercial terms on offer.”
The Labour party, whose policy is to nationalise the railways, criticised the government’s handling of the franchises.The Labour party, whose policy is to nationalise the railways, criticised the government’s handling of the franchises.
Andy McDonald, Labour’s transport spokesman, said: “The transport secretary has a woeful track record in awarding public contracts so it’s hard to believe today’s rail announcements will be any different.Andy McDonald, Labour’s transport spokesman, said: “The transport secretary has a woeful track record in awarding public contracts so it’s hard to believe today’s rail announcements will be any different.
“The expulsion of Stagecoach from the rail industry for not backing future pensions payments once more highlights the vulnerability of the system. Rail franchising is bust.”“The expulsion of Stagecoach from the rail industry for not backing future pensions payments once more highlights the vulnerability of the system. Rail franchising is bust.”
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