‘Government rigorously tested our plans’


Martin Griffiths: I was personally told at the time that it was the highest quality bid they had ever seen


Stagecoach chief executive Martin Griffiths has hit out at politicians for “point scoring” and misleading the public over the imminent collapse of the Virgin Trains East Coast franchise. He also implied that the Department for Transport should accept a degree of shared responsibility for VTEC’s situation.

In a video broadcast, Griffiths acknowledged that VTEC’s unsustainable losses had been caused by Stagecoach getting “our forecasts for passenger growth wrong”. However, he refuted statements from transport secretary Chris Grayling that Stagecoach had overbid for the contract, pointing out that the DfT had fully endorsed the VTEC business plan when awarding the franchise in 2014.

“The government rigorously tested our plans and financial assumptions before awarding us the East Coast contract…  it decided we offered a high quality and realistic bid…  indeed, I was personally told at the time that it was the highest quality bid they had ever seen,” Griffiths said. “That bid was based on the information and trends available at the time, including economic forecasts used by government.”

He argued that the franchise had been making unsustainable losses because it had been hit by economic factors that could not have been foreseen, including the impact of Brexit, terrorism, and the lowest growth across the railway for 20 years. In addition, he said the business had been affected by the poor reliability of Network Rail’s signalling and track. Stagecoach is pursuing a claim against the infrastructure operator understood to be for compensation of tens of millions of pounds.

Griffiths was also highly critical of Labour politicians for aggressively misrepresenting the VTEC contract to build support for their policy of renationalising the railway. He was particularly disappointed by respected figures, including former transport secretary Lord Adonis, portraying plans for early termination of the franchise as a billion-pound plus “bail out” of VTEC’s plans to return £2.5bn in premium payments to the DfT over the original eight-year contract.

A lot has been said and written in the past few months about Virgin Trains East Coast – a lot of it has been misinformed and much of it has been politically motivated

“A lot has been said and written in the past few months about Virgin Trains East Coast – a lot of it has been misinformed and much of it has been politically motivated. Frankly, a lot of misleading comment from people in positions from whom we all have a right to expect better,” Griffiths commented.

Stagecoach’s view is that Labour politicians have deliberately ignored key aspects of the contract. They include the likelihood that VTEC would never have been liable for the full premium because of Network Rail’s postponement of infrastructure upgrades, and a contractual limit on the financial support the company was liable to provide to VTEC if it began making losses.

“It was the government’s choice to have a contract where it was financially responsible after that limit was reached – and the government knew the risks it was accepting,” Griffiths said.

He also argued that, contrary to Labour’s briefings, the franchise has been performing better, investing more, providing more services for passengers and paying higher premiums to the DfT than it did during its five years under public sector control, before Stagecoach/Virgin took over. “The result: more passengers abandoning cars and planes to travel by rail – and 92% customer satisfaction,” Griffiths said. “On all these measures, we have delivered far more than was ever the case when the East Coast route was operated in the public sector.”


This article appears in the latest issue of Passenger Transport.

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