FirstGroup's West Coast deal goes off the rails

Government scraps plans to award the multi-billion pound West Coast franchise to FirstGroup. Branson rejoices.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013
There will be quite a few red faces over at the Department of Transport today. New transport secretary Patrick McLoughlin has canned the FirstGroup West Coast franchise deal on the grounds that mistakes were made by the department during the tender process. FirstGroup and Virgin are entirely blameless, he said, but the Department of Transport’s careless errors were ‘deeply regrettable and completely unacceptable’.

The fiasco will cost government an estimated £40m to put right. Several staff have been suspended over the debacle, he added.

The news will be music to Richard Branson’s ears. The Virgin boss had contested the FirstGroup deal from day one, accusing the civil servants of ‘getting their maths wrong’. He called for a full judicial review into the franchise process – a move which was originally blocked by then transport secretary Justine Greening, but is now going ahead uncontested by the Department of Transport. Incontravertible proof that, despite appearances, Branson is far more than a PR machine. Shame that it took the threat of a judicial review to force government to admit that it did its sums wrong... 

FirstGroup has simply said that it is ‘extremely disappointed to learn this news’ and that it awaits the outcome of the DfT's inquiries. But this will be a bitter pill for FirstGroup boss Richard Parry to swallow. While McLoughlin has insisted that FirstGroup is not to blame for the collapse of the deal, FirstGroup’s shares are down 17% this morning.

We’ll have to wait for the official findings of the various reviews to find out exactly what went wrong, however. And there are several in the works: the judicial process started by Branson and his team, the Department of Transport’s own investigation, and an independent report by Eurostar chairman Richard Brown into the wider rail franchise programme.

However, it is safe to say that at some point during the 15-month bidding process, Department of Transport staff lost their grip on the West Coast franchise deal; not ideal when you’re dealing with a 13-year contract serving 31 million passengers. The franchise contract is now in limbo – although Branson has been quick to blog that he is ‘hopeful they will now accept that Virgin Trains should carry on running the West Coast Main Line.’

MT reckons the odds are bang on that happening. But all McLoughlin will say at the moment is that, ‘the trains that run now will continue to run with the same drivers, the same staff and timetables as planned.’ The debacle has also had a knock-on effect across the franchise system. Three other franchise competitions have now been put on hold while the reviews are conducted.

All of this is testament to old Beardy’s industry clout. Once Branson gets the bit between his teeth, he can drag the most unwilling arties along with him. Just think, if he hadn’t kicked up a fuss, the deal would still be on the rails…

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