Stagecoach fury after it is barred from three rail bids

Stagecoach accused ministers of putting the future of the UK rail industry in doubt on Wednesday in a stinging attack as ministers dropped a pensions bombshell on the sector.

The transport firm reacted after being disqualified by the Department for Transport from bidding for three new franchises for “non-compliant” bids.

Stagecoach was chasing the East Midlands franchise, the Southeastern deal with support from Alstom and the West Coast franchise in a joint bid with Virgin and SNCF.

But at the 11th hour Stagecoach was told it was being dropped because of its unwillingness to bear the long-term funding risk for railway pensions during the eight-year franchise period.

The Pensions Regulator has estimated a funding gap of up to £6 billion, which Stagecoach argues the private sector should not be expected to bear alone following Richard Brown’s review of rail franchising six years ago.

Chief executive Martin Griffiths, who is seeking an “urgent” meeting with the department, said: “We are... extremely surprised that the Government still expects private operators to take risks they are not best placed to manage, despite the recent difficulties experienced by a number of operators of outsourced public-sector contracts. Forcing rail companies to take these risks could lead to the failure of more rail franchises and cannot be in the best long-term interests of either customers, employees, taxpayers or the investors the railway needs for it to prosper.”

Griffiths added that the decision also “further damages the already fragile investor confidence in the UK rail market and it undermines the involvement of two of the last British transport groups who are part of running Britain’s railway”.

Virgin Trains that it was “very disappointed” by the DfT’s unexpected decision. Industry sources said Arriva, owned by Deutsche Bahn, was also barred from bidding although the company was unavailable for comment.

The East Midlands contract was awarded to Dutch-owned Abellio to run services until 2027 although the row over Stagecoach, which has run the franchise since 2007, overshadowed the award. A DfT spokesman said it had “total confidence” in its processes.

It added: “Stagecoach is an experienced bidder and fully aware of the rules of franchise competitions. It is regrettable that they submitted non-compliant bids for all current competitions which breached established rules and, in doing so, they are responsible for their own disqualification.”