Skift Take

Even though the contract doesn't automatically revert to Virgin, Branson's win is huge here as his persistence forced the government to shuffle ministers and criticize its own handling of the bidding process.

Business bodies have lambasted the government’s mishandling of the West Coast main line franchise as the transport secretary scrapped the contract over bidding “flaws”.

Both the British Chambers of Commerce (BCC) and the Institute of Directors criticised the government over the bungled contract, warning that it could put businesses off tabling bids and deter investment.

“Government tendering processes must be whiter than white, or firms will be deterred from applying to take contracts on, which will harm service delivery,” said Simon Walker, director general of the Institute of Directors.

“It is shocking that such a crucially important process has gone so seriously wrong. Businesses need a stable, reliable rail network and certainty in the provision of key infrastructure.”

In a dramatic move on Tuesday night, the Department for Transport cancelled the contract to run the West Coast main line due to “significant technical flaws” in the bidding process, which will be re-run.

The Department for Transport’s decision came just a day before Virgin’s High Court legal challenge over the decision to award the contract to FirstGroup was due to start.

Virgin Trains lost control of the prestigious West Coast rail line in August, with the contract being handed to FirstGroup after Virgin’s rival made an offer of £5.5bn to run the line for the next 13 years.

Adam Marshall, director of policy at the BCC, said that mistakes in rail franchising were “indicative of a bigger problem across Whitehall, which has bungled major procurements for years”.

“Procurement mistakes and problems increase risk for companies, threaten jobs, and harm Britain’s reputation as a destination for inward investment,” he added.

“Britain needs procurement professionals across government with the same level of skill and ability as their counterparts in the private sector.”

He pointed out that the West Coast main line is one of Britain’s “most important business corridors, and companies in cities up and down the country will be concerned that this situation could affect both current services and future investment in critical passenger services”.

“Ministers must now act swiftly to ensure that investment in the railway network, which underpins investment in our cities and towns, does not suffer as a result of their decision to re-run the competition for this crucial franchise,” he said.

Playing down fears of travel disruption as a result of his decision, Patrick McLoughlin, the transport secretary, stressed that passengers will continue to be served by the same trains and frontline staff.

He described the “mistakes” made as “deeply regrettable”. “I have ordered two independent reviews to look urgently and thoroughly into the matter so that we know what exactly happened and how we can make sure our rail franchise programme is fit for purpose,” he said.

Shares in FirstGroup were down around 20pc on Wednesday after the government cancelled the contract. Analysts at Shore Capital said: “This is disappointing news for FirstGroup and in our view, could lead to fears over the loss of the franchise and subsequent balance sheet concerns.”


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Tags: rail, virgin

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