Stagecoach threatens legal action after Government blocks bid

The travel operator Stagecoach has threatened legal action against the Government after the Transport Minister Chris Grayling barred the firm from bidding for the West Coast, South Eastern and East Midlands rail franchises.

It comes after the Department for Transport (DfT) revealed that Stagecoach had submitted “non-compliant” bids for the franchises because of an apparent “pensions risk”.

Under the terms of the bidding process, franchisees are required to take on and fully fund the Railways Pension Scheme.

To add to the firm’s woes, it was also revealed that the East Midlands franchise – currently under Stagecoach’s control – had been awarded to competitor Abellio.

The move could see Virgin Trains – which is 49 per cent owned by Stagecoach – disappear from Britain’s railways by November.

However, the firm has now threatened to take legal action against Mr Grayling and his department for acting unfairly.

Speaking on behalf of Virgin trains, founder Sir Richard Branson said the firm is “baffled” as to why the DfT did not inform them that they would be disqualified from submitting a bid, adding that the Government “had known about this disqualification in our bid on pensions for months”.

“We can’t accept a risk we can’t manage – this would have been reckless. This is an industry-wide issue and forcing rail companies to take these risks could lead to the failure of more franchises,” he said.

According to reports, Stagecoach has written to Mr Grayling and requested that the 10-day standstill period that comes after the franchise award be extended by a further two weeks.

“We can confirm we have written to the DfT seeking answers to the numerous legitimate questions many people have about their decision,” said a spokesperson.

“We expect a prompt, full and transparent response to help restore public confidence in the integrity of the government’s procurement process, which has been badly shaken by this and other recent events.”