Britain’s oldest train franchises operator Stagecoach on Wednesday said it will no longer bid on rail contracts after a government bust-up over pensions.
The co-owner of the Virgin Trains brand will end a two-decade stint focusing on running trains to concentrate on buses, coaches and trams.
Stagecoach operates the East Midlands franchise, which ends in August, and the Virgin West Coast franchise which draws to a close in November.
It was disqualified from bidding on three new rail franchises by the Department for Transport in April after refusing to fund pension shortfalls.
The department, led by Chris Grayling, wants to put train companies on the hook for any shortfall in employee contributions into pension schemes. Stagecoach said it could be liable for around £1.6 billion.
The FTSE 250 company, which spent £20 million preparing the bids, has launched legal action over its disqualification.
Chief executive Martin Griffiths said the awards system was “fundamentally flawed” and management time was better spent running the buses business.
“It’s time to move on,” he said. “Running trains should be about doing the best for passengers and doing the best for taxpayers,” he said.
“It shouldn’t be about being asked to take unquantifiable and unmanageable risk transfers from the government. For the foreseeable future we won’t be bidding any more.”
The rail industry is facing a root-and-branch review by Keith Williams, who is due to make recommendations this year with changes in 2020. Virgin Trains, a well-known brand to passengers, is likely be wound up when the West Coast franchise ends.
Stagecoach was one of the first private companies running rail franchises on the South Western network in 1996 during John Major’s government. Griffiths blasted the government’s new position in the rail industry, saying it betrayed the original plans of privatisation.
“We’ve lost sight of what private sector involvement in the railways was all about, innovation, growth and putting passengers first. I’m disappointed.”
It today said profits rose 4% to £133 million although there were some pressures in the London buses market.
Congestion on the roads and more flexible working meant bus passenger numbers in the capital fell for the fourth consecutive year. London bus operating profit dived 20% to £10.7 million.
