FirstGroup reaps dividend despite rail franchise surrender

FirstGroup made a £40m dividend from Great Western Railway (GWR) last year, despite previously exiting its GWR contract to avoid paying £800m to the government.

FirstGroup has run GWR since it was privatised in 2006. In 2013, FirstGroup exercised a break clause to end the franchise early. The government allowed it to continue running GWR to provide continuity during infrastructure work and the introduction of new trains. Since 2013, GWR has received a series of contract extensions. Last November, the Department for Transport (DfT) announced the current franchise would continue until 2022, and possibly 2024.

This means that from 2013 to 2022, FirstGroup has been awarded the GWR franchise without a competitive process. Directly awarding the contract in this way is indicative of the dire state of rail franchising. The number of rail operating companies has dwindled. Most recently, in June 2018, Virgin Trains East Coast (VTEC) surrendered its franchise.

The performance of GWR has also dwindled. Despite the infrastructure upgrades and new trains that FirstGroup was charged with overseeing, overall passenger satisfaction in Spring 2018 was 81 per cent. Rail punctuality is at a 12 year low and the cost of season tickets will increase in January by 3.2 per cent. Cited in the FT, Roger Ford, of Modern Railways, said that the government subsidy to the railways doubled at privatisation and has risen about 30 per cent since — from £2.75bn in 1996-97 at today’s prices to £3.59bn.