Stagecoach barred from rail franchise bids in pensions row

Image copyright

Image caption

Stagecoach was bidding for one of the franchises in partnership with Virgin

Stagecoach says it is “extremely concerned” after the Department for Transport (DfT) barred it from three UK rail franchise bids.

The DfT says the bids for the East Midlands, South Eastern and West Coast franchises were “non-compliant” because they did not meet pensions rules.

“We are seeking an urgent meeting [with the DfT] to discuss our significant concerns,” said boss Martin Griffiths.

Stagecoach had “repeatedly ignored established rules”, the DfT said.

Mr Griffiths said in a statement: “We are extremely concerned at both the DfT’s decision and its timing. The department has had full knowledge of these bids for a lengthy period and we are seeking an urgent meeting to discuss our significant concerns.”

Bidders for the franchises have been asked to bear full long-term funding risk on relevant sections of the Railways Pension Scheme, Stagecoach said.

Mr Griffiths said conditions put on franchise bidders are “more evidence that the current franchising model is not fit for purpose”.

“It also further damages the already fragile investor confidence in the UK rail market and it undermines the involvement of two of the last British transport groups who are part of running Britain’s railway.”

Stagecoach had bid independently for the East Midlands franchise, had intended to partner with Alstom for the South Eastern operations, and was jointly bidding for the West Coast Partnership with Virgin and SNCF.

Stagecoach shares fell almost 10% in early trading.

‘Ignored rules’

A DfT spokesman said that other bidders had met its requirements, and also announced that the East Midlands franchise had now been awarded to Abellio “after they presented a strong, compliant bid”.

He said: “Stagecoach is an experienced bidder and fully aware of the rules of franchise competitions. It is regrettable that they submitted non-compliant bids for all current competitions which breached established rules and, in doing so, they are responsible for their own disqualification.

“Stagecoach chose to propose significant changes to the commercial terms for the East Midlands, West Coast Partnership and South Eastern contracts, leading to bids which proposed a significantly different deal to the ones on offer.

While Stagecoach has played an important role in the UK railways industry, “it is entirely for Stagecoach and their bidding partners to explain why they decided to repeatedly ignore established rules by rejecting the commercial terms on offer”.