Posted 3rd July 2017 | 2 Comments

Franchising timetable slips again

THE Department for Transport’s franchising timetable is slipping again, possibly because of delays introduced by the snap General Election.

The winner of the West Midlands franchise should have been announced in June, ready for the new contract to start in October.

There are only two contenders after MTR, which had been shortlisted, decided to withdraw. As a result the present operator Govia is competing with a joint venture of Abellio, Mitsui and the East Japan Railway company. The two Japanese firms have a minority stake. Mitsui is already an active trading partner with Abellio, because it acquired 40 per cent of Abellio’s Greater Anglia earlier this year.

Three months is usually considered the minimum for ’mobilisation’ if an incumbent operator is not reappointed, and the delay in making the announcement could mean that the start of the new franchise will be delayed.

The Department for Transport has already prepared the way for this, because the present London Midland franchise can be extended past October for up to 13 reporting periods or, in other words, 12 months.



TIMES are tough at the Department for Transport, which is already wrestling with serious problems affecting two other franchises (writes Sim Harris).

Govia Thameslink Railway is continuing to battle with the effects of industrial action, and Govia will now find out very soon whether breaches of performance targets can be laid at its door, or whether its claim that there were circumstances beyond its control (London Bridge, industrial action, etc.,) will be accepted by the DfT.

The negotiations have been going on for well over a year, but at the High Court hearing on 29 June the DfT was allowed just 14 days to publish its decision, and the judicial clock is ticking.

If Govia is heavily penalised it just might be the last straw for an operator which has already seen its profits halved as a result of the various problems. And the DfT does not want – really does not want – to see GTR fall back into its hands, complete with a bitter industrial dispute rumbling on as a rancid bonus. 

The threatening cloud of a possible judicial review (conceivably more than one) is still looming over the DfT, while Chris Gibb has warned that there are deep-seated problems on Southern, and that introducing the full 24tph Thameslink service next year might be a timetable too far unless at least £300 million is spent on mending the infrastructure first. In fact, this recommendation was immediately accepted by the DfT when it received his report in January, but the work has now got to be done, and done in time.

Virgin Trains East Coast poses a simpler and also uncomfortably familiar problem.

Stagecoach (which in spite of the brand actually owns 90 per cent of VTEC) has warned of an £84 million deficit on East Coast over the next two years, and wants its ‘rights and obligations’ to be reconsidered. In plain English, this means lower premiums. It was just this sticking point that derailed both GNER and National Express, when their pleas for amended East Coast contracts were rejected.

In the past the DfT has always been opposed to changing the rules of franchise contracts after they have been signed in good faith.

Again, Mr Grayling must decide which is the lesser of two evils. He either gives in over the premiums, or risks a third collapse on East Coast in little over a decade. 

The DfT is facing some uncomfortable decisions. It could be a matter of choosing between some ignominious retreats or, at the very worst, two shipwrecks on the beach.

Reader Comments:

Views expressed in submitted comments are that of the author, and not necessarily shared by Railnews.

  • Andrew Gwilt, Basildon Essex

    But who will take over the West Midland franchise if Govia loses the franchise that it operates London Midland.

    Abellio, MTR, First Group, Trenitalia & few other bidders could take over the West Midland franchise if one of those bidders wins the contract to take over from Govia and to manage the West Midlands franchise.

    [If Govia has not won West Midlands than it will be Abellio and its Japanese partners. MTR withdrew (as we have said), while the other companies you mention were not shortlisted (may not have been interested, indeed) and are irrelevant.--Editor.]

  • Christopher Jones-Bridger, Buckley

    Excellent analysis by Mr Harris. The problems facing the franchising process are very much the creation of the DfT and do raise questions over the unnecessary expense the industry is exposed to with no corresponding value to the customer. Other than keeping the legal & accounting professions in employment has the franchising process now outlasted it's alleged worth?

    While the on going industrial action has led to the breakdown of GTR services on Southern Mr Gibb's report has finally exposed the underlying problems of the GTR operation. From day one it was under resourced for the considerable change planned during the execution of the Thameslink programme. When created it was recognised that these changes were happening and the contract form adopted by DfT was meant to recognise the risks. As completion of the key infrastructure investment draws near it is increasingly clear that the planned benefits may may not all be capable of being delivered.

    That the ECML is facing it's third financial failure is unbelievable. Did not DfT and Stagecoach learn from past experience? Irrespective of who won the franchise it is tempting to see the DfT choosing the one providing the biggest premiums. The real world economics isn't that simple. As BR knew only too well inter city demand can be a fickle thing and the margin between success & failure is slim. With ECML both sides signed a contract in good faith but could they not see beyond ever increasing returns?.