Great Western Coffee Shop

Stagecoach Group plc ("Stagecoach") confirms that it has been notified by the Department for Transport ("DfT") that it is ending the discussions with Stagecoach subsidiary, Stagecoach South Western Trains Limited ("South West Trains"), regarding the direct award of a new rail franchise.

The current franchise is due to end in February 2017 and, as previously reported, South West Trains had submitted proposals to the DfT as part of previously announced government plans for the direct award of a new franchise to at least April 2019.

The DfT has now indicated that it plans to invite applicants to tender for a new long-term franchise to commence sometime in 2017.

In the meantime, the DfT has indicated that it expects to exercise its pre-contracted option to extend the current South West Trains franchise beyond February 2017. The option allows the DfT to extend the franchise to no later than August 2017. Stagecoach does not currently expect South West Trains to earn a significant profit during any extension period.

Our direct award proposals sought to build on the extensive improvements delivered under our operation of the franchise since 1996, providing more benefits for customers, good value for taxpayers and an appropriate return for investors.

However, despite extensive negotiations, a significant difference has remained between both parties regarding the financial evaluation of the proposals. As a result, South West Trains has been unable to reach an agreement on a direct award.

Nevertheless, as the incumbent operator with nearly 20 years' experience in growing and improving one of the most complex and busiest rail franchises in the country, we believe we are in a strong position to submit a powerful and attractive bid for a new South West Trains franchise.

In the meantime, we will continue to deliver on our commitments to government and customers, including the ^50m package of investment agreed with the DfT earlier this year as part of a Deed of Amendment to the existing franchise.

We remain positive about the opportunities in the UK rail market. Constructive discussions are continuing regarding a direct award at East Midlands Trains for a period of at least two years. In addition, we are currently shortlisted for both the Transpennine Express and East Anglia franchises.

Stagecoach will continue to evaluate opportunities to bid for UK rail franchises on a case-by-case basis. We seek new opportunities that offer the right balance of risk and reward, provide scope for us to improve services to customers, and which are compatible with maintaining an acceptable balance of the Group's portfolio between bus and rail businesses.

The risk is DfT my do a Borisisation on the inner London services ie hand them over to TfL, reshape the West of England and role part SWT area into a greater Greater Western franchise. 

I fear for the Salisbury to Exeter line given both this and the recent decision to scale back rail investment

Could we get this into perspective a bit.  This is not the 1970's or 80's. Look the line has already had some investment and no one is talking about rationalisation of lines any more. All DfT are talking about is slowing investment down to a pace that NR can actually deliver. 

I don't wish to get into a spat about this and appreciate what you are saying. I certainly do not anticipate rationalisation on the scale of the 70s and 80's, but I can see through services between Exeter and London Waterloo being reduced. In September, SWT are introducing extra services between Salisbury and Yeovil with the introduction of the new circular services via Yeovil and Frome, but can't see these improvements being included in a new franchise. I agree with Electric train about the Greater Western franchise and fear that all that will be required is local services between Exeter and Salisbury connecting into London services at Salisbury and Exeter respectively - with, maybe, one or two through services.