Government strips Stagecoach of Virgin East Coast franchise

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The East Coast Main Line will be nationalised once again as the franchise agreement from Stagecoach Group (90%) and Virgin Trains (10%) has been terminated.

Britain will replace Stagecoach's East Coast rail franchise with a public-private partnership that will connect London with Edinburgh, transport minister Chris Grayling said on Wednesday, after he announced a renationalisation of the route.

The loss-making service is to be repalced by a public sector "operator of last resort" (OLR) and is being renamed London and North Eastern Railway (LNER).

The franchise was originally set to end in March 2023 but the appointment of LNER as the operator of last resort marks the third time that a private TOC has had its InterCity East Coast franchise contract cancelled.

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The continued uncertainty over the future operation of the East Coast Mainline is causing significant concern to residents, commuters and workers in the City, as well as casting a shadow over the future economic development of York.

Stagecoach said it has "already impaired intangible assets" and "provided for losses" in relation to the East Coast line in its 2017 financial year results.

It said on Wednesday it hoped to continue to play a role in Britain's rail network in the future, and continues to be involved in running other United Kingdom rail franchises including the West Coast line between London and Manchester.

"Today's decision should not detract from the hard work and dedication of our people at Virgin Trains East Coast, who have been central to the transformation we have been delivering for our customers over the past three years".

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"Despite today's news, we believe that we can continue to make a positive contribution to the United Kingdom rail market, delivering long-term customer benefits and sustainable returns for taxpayers and investors", he added.

"Having more stability in the underlying contract between Government and the train company will help achieve these things that matter most to passengers". "In contrast, when it was run in the public sector, it returned £1bn to the Treasury".

Stagecoach said it and Virgin had been negotiating for a new contract with the Department for Transport but that it understood Mr Grayling was "no longer considering" them for the deal.

Labour's transport spokesman, Andy McDonald, said the government was seeking to create a "smokescreen" by touting closer state-corporate ties and that the proposal does not amount to nationalization.

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Transport secretary Chris Grayling took the decision after the public accounts committee found last month that forecasts for passenger growth from the franchisees were "wildly wrong" and proved that rail franchising was a "broken model".

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