The National Rail Contract possessed by South Western Railway has been extended by two years.

SWR is owned by FirstGroup and MTR, which have 70 per cent and 30 per cent respectively. It began as a franchise, replacing Stagecoach’s South West Trains, on 20 August 2017, and would have run for seven years to August 2024, with an option for a one-year extension at the discretion of the Department for Transport.

However, the franchise began to run into trouble in 2018, when the accounts recorded a loss of almost £137 million in the year to March 2019. The directors also warned that cash support of £146 million from FirstGroup and MTR would probably run out.

In January 2020, transport secretary Grant Shapps admitted that the franchise was ‘no longer sustainable’, but the Covid-19 pandemic caused franchises to be suspended in March. After a period of Emergency Measures, the DfT granted a new SWR National Rail Contract to start from March 2021 and run until May this year. This will now continue until May 2025.

The terms of the contract mean that revenue is collected and costs are paid by the DfT, which gives the operator a performance fee, and FirstGroup said that ‘current contractual arrangements’ will continue.

First’s CEO Graham Sutherland said: ‘We welcome the contract extension for South Western Railway, which enables us to build on the achievements of the first two years of the contract and continue improving the customer offering. We are committed to working closely with government and our partners to deliver a successful railway network that provides vital connections for customers and communities along the SWR route.’

The decision follows transport secretary Mark Harper’s announcement three days ago that the new ‘guiding mind’ to be known as Great British Railways is to go ahead, and that new-style Passenger Service Contracts managed by GBR will ‘balance the right performance incentives with simple, commercially driven targets’. He added that ‘risk will sit where it is best managed’.