Government bans Stagecoach from rail franchise competitions over pensions row

UK transport giant Stagecoach has been disqualified from three rail franchise competitions, and a Dutch state-owned company is taking over one of its routes.

The Department for Transport’s (DfT) decision to award the East Midlands Railway contract to Abellio means three out of five train journeys in Britain will soon be on services run by foreign companies or governments.

Stagecoach said it was informed by the DfT that it has been banned from the East Midlands, South Eastern and West Coast Partnership franchise competitions after submitting non-compliant bids “principally in respect of pensions risk”.

Bidders for the franchises were asked to bear the full long-term funding risk on relevant sections of the Railways Pension Scheme, Stagecoach said.

The decision means Virgin Trains – a joint venture between Virgin Group and Stagecoach – is set to lose responsibility for the West Coast Main Line services it has run since 1997.

Stagecoach chief executive Martin Griffiths said: “We are extremely concerned at both the DfT’s decision and its timing. The Department has had full knowledge of these bids for a lengthy period and we are seeking an urgent meeting to discuss our significant concerns.

“We have drawn on more than two decades of rail experience and worked in partnership with local stakeholders to develop high quality proposals to improve each of these rail networks.”

Stagecoach shares were down nearly 2% in morning trade at 130.9p.

The DfT claimed Stagecoach “breached established rules” and insisted the company is “responsible for their own disqualification”.

It added: “We have total confidence in our process. We have awarded the East Midlands franchise to Abellio after they presented a strong, compliant bid.”

Press Association analysis revealed that 60% of rail journeys will be on trains operated by overseas companies or governments once Abellio begins running the East Midlands route.

Germany has the biggest influence at 21%, followed by the Netherlands (14%), France (8%) and Hong Kong (7%).

The figures take into account the total journeys made with each operator in 2018, and what proportion of their ownership is based outside the UK.

Abellio will take over the East Midlands route – which runs from London St Pancras International to Northamptonshire, the East Midlands, Lincolnshire, Staffordshire and South Yorkshire – on August 18.

It was handed an eight-year contract despite the head of a Government-commissioned review into Britain’s railways recently declaring that franchising “cannot continue” in its current form.

Keith Williams, chairman of the Rail Review, said the way train companies are contracted to run services is “no longer delivering clear benefits”.

His inquiry will conclude in the autumn.

In relation to the South Eastern franchise competition, Transport Secretary Chris Grayling announced that his department is negotiating with current operator Govia to extend its deal to November 10, with the option of a further extension to April 2020.

The West Coast Partnership franchise is due to be awarded in June.

The winning bidder will be responsible for services on both the West Coast Main Line from March 2020, and designing and running the initial HS2 high-speed services from 2026.

Following the disqualification of a joint bid by Virgin, Stagecoach and SNCF because of the pensions row, a Virgin Trains spokesman said: “We’re very disappointed by the DfT’s unexpected decision. We’ve led the industry for more than 20 years with our ground-breaking innovations, such as automatic delay repay, and award-winning customer service.”