Breaking News
0

Britain to renationalise East Coast rail line as profits fall short

Stock MarketsMay 16, 2018 13:58
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A train travelling on the East Coast mainline is reflected in the River Tweed as it crosses the Royal Border Bridge at dusk, in Berwick-Upon-Tweed in Northumberland

By Sarah Young

LONDON (Reuters) - The British government is renationalising the rail route between London and Edinburgh, taking back the line from private operator Stagecoach after the company over-estimated the profits it could make on the route.

It is the third time since 2007 that the 393-mile (632 km) route has been returned to government hands, highlighting the difficulties for private companies of accurately bidding to run services on the privatised train network.

Stagecoach said on Wednesday that the government had scrapped the contract, three months after Transport Minister Chris Grayling said he was considering taking back control of the line which it has run since 2015.

Passenger and freight rail services in Britain were privatised in the 1990s, when routes were grouped into franchises and operators bid to run services for a set number of years.

Those companies have run the lines on a for-profit basis, but the government has been forced to step in when those contracts have failed, and the government-owned Directly Operated Railways ran the East Coast service from 2009-2015.

The failure of the current East Coast contract under the pro-privatisation Conservative government plays into the hands of the opposition Labour party who have pledged to nationalise industries like rail and water.

Grayling told parliament on Wednesday that the new railway would be a partnership between public and private operators after the Stagecoach contract ends on June 24, five years earlier than planned.

The government said in February that Stagecoach had overbid for the contract, meaning that its profits were below forecast, resulting in a financial covenant breach, and costing it 200 million pounds.

Stagecoach owns 90 percent of the East Coast franchise alongside Virgin.

Explaining the contract's difficulties in February, Stagecoach said that some of its forecasts for growth on the line were based on enhancements expected to be carried out by state-backed rail infrastructure company Network Rail, but those actions had been either delayed or abandoned.

It said on Wednesday it hoped to continue to play a role in Britain's rail network in the future.

"Despite today's news, we believe that we can continue to make a positive contribution to the UK rail market, delivering long-term customer benefits and sustainable returns for taxpayers and investors," Stagecoach CEO Martin Griffiths said.

Stagecoach continues to be involved in running other UK rail franchises including the West Coast line between London and Manchester.

Britain to renationalise East Coast rail line as profits fall short
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email