East Coast boss aware of problems just weeks after taking over
Stagecoach chief executive Martin Griffiths said he knew there were issues ‘a few weeks after we got in’.
The boss of the majority owner of Virgin Trains East Coast has revealed he knew the route faced financial difficulties just weeks after taking over responsibility for it.
Stagecoach chief executive Martin Griffiths said the collapse of the rail franchise was a “very painful experience”.
Giving evidence to the Commons’ Public Accounts Committee (PAC), he also disclosed that he would refuse a bonus this year if he is offered one.
In November 2014 Virgin Trains East Coast – a joint venture between Stagecoach (90%) and Virgin (10%) – was awarded the franchise to run trains on the line between London King’s Cross and Edinburgh for eight years.
Stagecoach reported losses on the line and in November last year Transport Secretary Chris Grayling announced that the franchise would be terminated in 2020 to enable it to become a public-private railway.
But earlier this month Mr Grayling told the Commons that it would only be able to continue in its current form for a “very small number of months”.
He said Stagecoach had “got its numbers wrong” and had “overbid”.
Labour described the decision as a “bailout”.
Mr Griffiths told the PAC that soon after the franchise began in March 2015 he realised it was not going to generate the revenue expected.
“I knew about this a few weeks after we got in,” he said. “I knew we had a problem.
“I’ve been talking to the Department for Transport about it for two years.”
Mr Griffiths insisted that Virgin Trains East Coast is not “shirking where we have responsibility” and has not been “given any special favour”.
He said Stagecoach will lose more than £200 million over the course of the franchise, including forfeiting a £165 million guarantee.
“I’m very disappointed. It’s been a very painful experience,” he admitted.
“But when we sign contracts we honour them.”
Mr Griffiths told the committee that the Manchester Arena bombing was one of the reasons for the route losing money.
He said: “In the last three years railway revenue growth across the UK has collapsed.
“That is to do with the economy, to do with political uncertainty.
“We’ve had some very terrible high profile incidents in places like Manchester, which you will clearly be aware of, and a fundamental change in people’s perceptions about travel.”
Asked if he would accept a bonus payment for his role as chief executive, Mr Griffiths replied: “I wouldn’t take a bonus this year.”