February 6, 2018 / 8:16 AM / 2 years ago

Britain could take control of rail line after Stagecoach contract failure

LONDON (Reuters) - Britain could take over the running of the rail route between London and Edinburgh from private operator Stagecoach (SGC.L) after the company got its numbers wrong, leaving the contract close to collapse, the Transport minister said on Monday.

Should the East Coast rail service return to government hands it will be the second time in a decade that the line has been renationalised, highlighting the difficulties facing Britain’s privatised train network.

Shares in Stagecoach fell 13 percent in early trade.

Transport Minister Chris Grayling told parliament on Monday that Stagecoach, which owns 90 percent of the East Coast franchise alongside Virgin, had breached a financial covenant and a new arrangement was needed shortly. The news followed warnings late last year that the contract was in trouble.

“The problem is that Stagecoach got its numbers wrong. It overbid and is now paying a price,” he told lawmakers.

“It is now clear that this franchise will only be able to continue in its current form for a matter of a very small number of months and no more.”

Grayling said he would now be seeking a new arrangement to run the railway, which could include the government running it until 2020, or Stagecoach continuing to operate the line on a not-for-profit basis.

In the meantime, Grayling said that the line would continue to operate as usual. From 2020, there will be a new long-term plan for the route in place, he added.

Stagecoach’s financial miscalculations had cost it 200 million pounds, the minister said.

Reporting by Sarah Young; editing by Kate Holton

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