Shares in FirstGroup fell nearly 8% today after the UK Government said the transport firm’s key TransPennine Express (TPE) franchise will not be renewed after it ends later this month.
The FTSE 250 shares staged a partial recovery to end the day nearly 5% lower at 117.4p.
An “operator of last resort” will be appointed by the Department for Transport (DfT) to run the network, which has been plagued by cancellations, from May 28.
It means a raft of intercity trains operating across the north of England and into Edinburgh and Glasgow will become state-owned, at least for a spell.
Aberdeen-based FirstGroup has run TPE under its current franchise since April 2016.
But it has been involved in running the trains, either on its own or with partners, since February 2004.
Our team have worked extremely hard to improve services.”
Graham Sutherland, chief executive, FirstGroup
The company said it was “disappointed” the contract will not be renewed after May 28.
Chief executive Graham Sutherland said: “We have operated TransPennine Express and its forerunners since 2004, and are very proud to have served the communities across northern England and into Scotland, carrying millions of passengers and introducing new trains, new routes and more seats for our customers.
“Our team have worked extremely hard to improve services, including by recruiting and training more drivers than ever before.
“We have also worked closely with the DfT and Transport for the North ( a public-private sector partnership south of the border) on an agreed recovery plan as well as an improved offer on overtime working for our drivers.”
Mr Sutherland added: “Today’s decision does not alter our belief in the important role of private rail operators in the delivery of vital, environmentally-friendly transport for customers and communities across the UK.”
TPE contributed £415.8 million of revenue to FirstGroup’s total of nearly £4.6 billion last year, as well as £13.2m of adjusted operating profits.
But performance across the network deteriorated, which FirstGroup said was due to circumstances “not wholly” within its control. It cited challenging industrial relations, including the withdrawal of “longstanding, industry-standard overtime arrangements”.
‘Unprecedented’ training requirments
The company also highlighted “unprecedented driver training requirements due to infrastructure upgrades”.
It added: “Following the introduction of an agreed recovery plan in February 2023, cancellations have fallen by approximately 40% and will continue to do so as more drivers become available over the next few months.”
Explaining its decision, DfT said it followed “months of significant disruption and regular cancellations”.
This has led to a “considerable decline in confidence for passengers who rely on the trains to get to work, visit family and friends and go about their daily lives”, it added.
The department went on: “It has been decided that to achieve the performance levels passengers deserve, and that the northern economy needs, both the contract and the underlying relationships must be reset.”
But the DfT insisted the move to transfer TPE to its operator of last resort was temporary.
“It is the government’s full intention that it will return to the private sector,” it added.
Minister says passenger experience ‘must come first’
Calling for an end to a wave of rail strikes and the disruption they cause, Transport Secretary Mark Harper said : “Passenger experience must always come first.
“This is not a silver bullet and will not instantaneously fix a number of challenges.”
FirstGroup runs buses and trains throughout the UK. These operations carried more than 1.4 million passengers daily in 2021-22.
Conversation