Stagecoach has been disqualified from bidding for rail franchises after submitting “non-compliant bids”.
The Department for Transport (DfT) said Stagecoach had proposed changes to bids for three contracts for East Midlands, South Eastern and West Coast Partnership services, which “breached established rules” around pension provision.
In a blog Sir Richard Branson said the DfT decision meant Virgin Trains, who bid to run West Coast services in partnership with Stagecoach, “could be gone from the UK in November”.
A DfT spokesperson 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.
“We have total confidence in our process. We have awarded the East Midlands franchise to Abellio after they presented a strong, compliant bid.”
The Pensions Regulator has said up to £6bn will be needed to plug a gap in train company pensions.
Martin Griffiths, chief executive of Stagecoach, said: “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 on the franchises were asked by the DfT to bear the funding risk, but Stagecoach has said it strongly believed “that the private sector should not be expected to accept material risks it cannot control and manage”.
Griffiths said: “Forcing rail companies to take these risks could lead to the failure of more rail franchises and cannot be in the best long-term interests of either customers, employees, taxpayers or the investors the railway needs for it to prosper.
“This is more evidence that the current franchising model is not fit for purpose.”
Sir Richard said: “We’re baffled why the DfT did not tell us that we would be disqualified or even discuss the issue – they have known about this qualification in our bid on pensions for months.
“Our first priority is always to look after our teams. The pensions regulator has warned that more cash will be needed in the future, but no one knows how big that bill might eventually be and no responsible company could take that risk with pensions. We can’t accept a risk we can’t manage – this would have been reckless.”
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