The Courier & Advertiser (Perth and Perthshire Edition)
Stagecoach to lose East Coast rail line
FRANCHISE: Chief executive apologises for getting sums wrong
Public transport giant Stagecoach admitted to getting its sums wrong yesterday after the UK Government sensationally stepped in to take back control of the main East Coast rail line between Scotland and London.
The Perth-headquartered group revealed it is facing a £200 million hit from the debacle after Transport Secretary Chris Grayling said the operator was “running out of money on the franchise” after its predictions for passenger growth on the key route failed to materialise.
Mr Grayling said the Government would now assess options for the line after telling Parliament the current £3.3 billion franchise arrangement – a Stagecoach led joint venture with Virgin Rail – could only continue for a “number of months”.
In an extraordinary move last night, Stagecoach chief executive Martin Griffiths apologised to investors over the impact of the failure of the franchise.
Stagecoach last night hit out at “misinformed” and “politically motivated” commentary after the UK Government said it was considering taking its East Coast rail franchise back into public hands.
Transport Secretary Chris Grayling said he was considering two options for the Edinburgh to London line after he told the Commons that the Stagecoach-led Virgin Trains East Coast franchise was in trouble and could only continue in its current form for a “very small number of months and no more.”
The options are to allow the current operator to continue on a short-term not-for-profit basis or impose direct Department for Transport control.
Mr Grayling later explained: “What has happened is that Stagecoach, the company that operates the service, committed to give more money to the government than actually the revenues from passengers enable it to afford, and it’s running out of money on the franchise.
“So we’ve got to decide how to sort that out. We’re going to do it in a way that delivers the best possible value for the taxpayer and keeps the service flowing smoothly.
“So there’s some technical work to do but the important thing to say is that it’s not going to affect the travelling public and nor has the taxpayer, nor has the government bailed out a private company that got it wrong.”
Stagecoach chief executive Martin Griffiths said a significant amount of misinformation had been bandied about in recent months about the franchise. However, he admitted Stagecoach had got its figures wrong.
“The government rigorously tested our plans and financial assumptions before awarding us the East Coast contract. It decided we offered a high quality and realistic bid,” Mr Griffiths said.
“That bid was based on the information and the trends available at the time, including economic forecasts used by government. But while passengers and taxpayers have benefited hugely from our management of the East Coast railway an unprecedented combination of circumstances have meant our financial plans have not worked out.”
Mr Griffiths said Stagecoach was facing a £200 million hit as a result of the franchise’s failure.
“The bottom line is that, in hindsight, we got our forecast for passenger growth wrong and our business has lost close to £200 million from the contract.
“We are sorry for the impact this has had on our investors who have received no dividends from Virgin Trains East Coast and have seen a significant fall in the value of their investment.
“That is our responsibility. But what is also clear is our people and our company have acted professionally and with complete integrity.
“We have met in full our obligations to fund the franchise, even in challenging times.”