Operators and government blamed for rail failure

The early termination of the Virgin Trains East Coast franchise for East Coast rail means a massive corporate welfare boon for Stagecoach.
Virgin Trains East Coast 82200 at King's Cross Station in London in March 2015. (Aubrey Morandante/Wikimedia Commons)

The UK’s East Coast rail franchise, failed because the private operator’s revenue projections were “over ambitious”, MPs have concluded.

The Intercity East Coast (ICEC) franchise has failed three times in just over a decade.  In June 2018, VTEC, the joint venture between StageCoach and Virgin Group had its contract terminated after major shortfalls in revenue and passenger numbers.  The franchise is now run by the operator of last resort under the brand ‘London North Eastern Railway’. The Department for Transport (DfT) has said it hopes to combine train and track operators in an ‘East Coast partnership’.

The Transport Select Committee attributed “prime responsibility” for the failure to VTEC. Its “unprecedented” forecasts of 10 per cent annual growth in revenue meant that the franchise’s financial position had been “bleak from day one”. MPs however, said that the DfT also bore responsibility for the failure. The department was found to have encouraged overbidding and had not conducted the appropriate due diligence on bids.

Click to access 891.pdf