Sir Richard Branson has called for all rail franchising competitions to be suspended, as the Virgin Group and partner Stagecoach consider legal action over their disqualification from three franchise bids.
Virgin Trains faces ejection from the railways after more than 20 years of running the biggest intercity route, the west coast mainline from London to Glasgow, which will be relet to a new operator before next April.
Branson issued a thinly veiled warning of legal action, as he urged the Department for Transport to be pragmatic while recalling a previous battle over the west coast franchise, which ended with the DfT conceding defeat and reinstating Virgin.
The government rejected criticisms of the process and said Stagecoach had repeatedly ignored established rules.
A rail review led by Keith Williams is considering extensive changes to the industry and one franchise competition, CrossCountry, has already been paused.
Branson said he had “deja vu” from the 2012 west coast franchising fiasco when the DfT defended handing over the franchise to rival FirstGroup as legally robust, before caving in and allowing Virgin to run the line ever since.
Writing on his blog, Branson said “history appears to be repeating itself”, after the DfT barred Stagecoach, the Virgin Group’s joint venture partner in Virgin trains, from bidding for three franchises due to be decided this year in a row over rail staff pensions. The franchises are: west coast; East Midlands and Southeastern.
The government said train companies would have to take on liabilities for the Railways Pension Scheme, which has a potential £6bn deficit. Stagecoach, which was forced off the east coast franchise last year along with Virgin after failing to meet ambitious promised payments, said the private sector should not be expected to bear the risks.
Branson said the pensions row led to “the inescapable conclusion [that] the government is setting franchisees up to fail”.
According to the government, there are no additional demands for operators to shoulder risk in relation to the pension scheme, beyond those which already exist in most franchises.
The tycoon also took issue with the DfT’s award of the the East Midlands franchise to the Dutch state-owned transport operator, Abellio, after reports that elements of Stagecoach’s bid were sent to the rival bidder in error.
He concluded: “With two of the three outstanding competitions under a cloud, it is far from clear that any franchise can be let robustly as things stand. The DfT should take a pragmatic view and cancel all franchising competitions whilst Keith Williams does his vital work.”
A DfT spokesperson said: “Abellio were awarded the franchise after presenting the strongest overall bid, which delivers the best deal for rail passengers.
“Stagecoach submitted non-compliant bids for the East Midlands Railway franchise and all current competitions, repeatedly ignoring established rules by rejecting the commercial terms on offer. In doing so, they are responsible for their own disqualification.
“An expert third-party investigation established conclusively that Abellio did not access any information relating to any other bidders that affected their bid. There was no effect whatsoever on the outcome of the bid process.”
