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East Coast rail decision ‘expected this week’

The Transport Secretary is to announce who will operate trains between London and Edinburgh after Virgin Trains East Coast withdrew from its contract.

The East Coast rail franchise could be scrapped this week, according to reports.

Transport Secretary Chris Grayling is set to announce who will operate trains on the line between London and Edinburgh in the wake of Virgin Trains East Coast withdrawing from its contract.

Mr Grayling previously said he will either put the franchise into public control through an operator of last resort – a consortium led by Arup – or negotiate a short-term deal with the incumbent.

The Financial Times reported that a decision “is expected before the end of the week”.

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In November 2014, Virgin Trains East Coast – a joint venture between Stagecoach (90%) and Virgin (10%) – was awarded the franchise to run trains for eight years.

Stagecoach reported losses on the line and in November last year Mr Grayling announced that the franchise would be terminated in 2020 to enable it to become a public-private railway.

But two months later Mr Grayling told the Commons that the franchise 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”.

Virgin Trains East Coast had agreed to pay the Government £3.3 billion to run the service until 2023.

Virgin and Stagecoach have managed reverse alchemy Aslef union leader Mick Whelan

Stagecoach chief executive Martin Griffiths told the Commons Public Accounts Committee that the collapse of the franchise was a “very painful experience”.

He said Stagecoach will lose more than £200 million over the course of the franchise, including forfeiting a £165 million guarantee.

Critics described the move as a “bail-out”, with Lord Adonis resigning as chairman of the National Infrastructure Commission after claiming the decision would cost taxpayers hundreds of millions of pounds in lost payments by the operator.

In his statement to the Commons in February, Mr Grayling said Stagecoach would only be allowed to run the franchise on a “not-for-profit basis”, with any financial rewards being performance-related and delivered at the end of a new contract.

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Virgin Trains East Coast is the third private operator to fail to complete the full length of a contract to run services on the route.

GNER was stripped of the route in 2007 after its parent company suffered financial difficulties, while National Express withdrew in 2009. The route was run by the Department for Transport (DfT) for six years up to 2015.

Mick Whelan, general secretary of train drivers’ union Aslef, said: “This is the third time in 10 years that a private company has mucked up the East Coast Main Line. In contrast, when it was run in the public sector, it returned £1 billion to the Treasury.

“That shows what we have been saying all along – that Britain’s railways should be run, successfully, as a public service, not for private profit. Because they can’t do it.

“Virgin and Stagecoach have managed reverse alchemy – by turning gold into base metal, and profits into losses on the East Coast.”

The Department for Transport would not confirm when the decision on the future of the franchise will be announced.

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