Issue 28/2012

19th October 2012

  • Virgin Trains has been asked to continue running the troubled West Coast Main Line for about a year,
  • Go-Ahead’s chief executive defends Britain’s rail franchising process as “not broken” in spite of the mistakes made;
  • The transport secretary has published the terms of reference for the two investigations into franchising.
In this issue:

Industry developments this week

Virgin Trains has been asked to continue running the troubled West Coast Main Line for about a year, the Government said this week. [The Times]

  • The [Financial Times] describes the settlement as “a short-term fix” that could still have European competition law implications.
  • The taxpayer cost of the fiasco could soar beyond the original £40m estimate because of potential FirstGroup legal action, the [Manchester Evening News] reports.
  • The [Financial Times] quoted critics as saying that a decision to save £1m in consultants’ fees led to problems that forced the government to scrap the West Coast main line contract, critics have said.

Further reaction from industry figures and politicians was reported this week:

  • David Brown, chief executive of Go-Ahead, has told the [Financial Times] the country’s rail franchising process “is not broken” in spite of the mistakes made in the West Coast main line competition.
  • Nigel Harris, in [Rail magazine], argues in an extensive editorial that FirstGroup could reasonably claim copensation for the entire life of the 15-year franchise that it has now been denied. He also points to rumours that all bidders for the West Coast franchise “were not all given the same, consistent information”.
  • Last week in the House of Lords former transport secretary Andrew Adonis described the franchise collapse as “probably the single biggest failure in British public policy since the poll tax”. [Railnews]

Transport secretary Patrick McLoughlin has published the terms of reference for the two investigations he has commissioned following his decision to scrap the franchise competition. [Transport Briefing]

  • [Transport Briefing] also examines the franchising steps to be played out throughout 2013.

Private Eye devotes a full page of coverage to the West Coast franchise cancellation and further ramifications for the DfT. The magazine

  • asks why it took legal action by Virgin to get the government to acknowledge flaws in the system [Link]
  • examines how franchise bid costs have multiplied since 2006 [Link]
  • points to former transport secretary Alistair Darling’s decision to bring franchising in-house [Link]
  • argues DfT’s troubles extend to other areas of rail policy, such as rolling stock [Link]

New rail services

A new Chiltern rail link between London and Oxford is set to open in 2015 after the government approved the £130m scheme. [Financial Times]

Other stories

The Rail Delivery Group has secured the backing of the ORR and the transport secretary to take on a formal role within the railway sector. [Transport Briefing]

Free wi-fi at London Underground stations is to continue for the rest of the year. [BBC News]

London’s transport commissioner has claimed a 1% cut in fares could reduce the money available to Transport for London for capital investment projects by £340m over 10 years. [Transport Briefing]

Finance, business and sharecheck

FirstGroup shares soared in late July and early August as rumours began to circulate it had won the West Coast mainline franchise. They fell by more than a quarter after the process was subsequently cancelled in late September.

Passenger numbers were up but sales revenue down in the third quarter of 2012 for Eurostar, with the operator blaming a pre-Olympic slump. [Railnews]

Directly Operated Railways, the parent company of East Coast, has reported pre-tax profits of £7.1m on revenue of £665.m [RAIL]

Go-Ahead has said it wanted to make profits of £100 million a year from running bus services in Britain. [The Times]

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