A selection of railway operators are one step closer to a winning bid for two UK rail networks after the Department for Transport announced its shortlist for the West Coast Partnership and South Eastern franchises. Those UK operators looking to secure the former have had to team up with foreign high speed rail companies, as the deal will also include running the initial HS2 high speed services between London and Birmingham from 2026 in addition to responsibility for services on the West Coast Main Line from April 2019. Only one of the four bidders for South Eastern are solely UK operated, raising questions about the need for foreign companies to step in.
FirstGroup (FGP) has teamed up with Italian high speed rail operator Trenitalia under its First Rail Holdings division to form the First Trenitalia West Coast Ltd bid. When the partnership was announced in January the companies also stated that they would together bid for the East Midland service, which will also not be awarded until 2018. In March FirstGroup won its joint bid with Hong Kong’s MTR for the seven year Southwest Rail franchise contract. Management observed that the government seems to be prioritising quality of service offered by the bidders instead of basing the decision solely on price, which they felt bodes well for its chances on both the West Coast Partnership and East Midlands bids.
Another bidder is West Coast Partnership Ltd, the joint venture between Stagecoach Group (SGC), Virgin Holdings and SNCF C3, which have 50 per cent, 20 per cent, and 30 per cent stakes respectively. When the partnership was announced in April Stagecoach chief executive Martin Griffiths called SNCF, the French operator of TGV high speed services, the “most recognised and capable high speed operator in Europe”.
Two Chinese companies, Hong Kong metro operator MTR Corporation and Chinese high speed rail business Guangshen Railway Company, are behind the MTR West Coast Partnership bid. This joint venture also includes a set of sub-contractors, made up of Deloitte MCS, Panasonic Systems Europe, Snowfall AB, Trainline.com, and WSP Parsons Brinkerhoff.
As for bids for the South Eastern franchise, Italy’s Trenitalia is on its own with its Trelitalia UK Ltd offer, as is Stagecoach with Stagecoach South Eastern Trains Ltd. The Go-Ahead Group (GOG) makes an appearance under Govia, a joint venture between the company and French transport group Keolis, with the London and South East Passenger Rail Services Ltd bid. The final offer is South Eastern Holdings Ltd, a joint venture between Dutch operator Abellio Transport Group, the East Japan Railway Company, and Japanese company Mitsui & Co.
The partnerships with foreign operators has ignited tensions with Britain’s transport union RMT, which expressed outrage that no public sector option was presented in the list of contenders, which it claimed would be cheaper and more efficient than a private operator. The union’s general secretary Mick Cash said that the “same gang of old chancers, rip-off merchants and overseas opportunists have been lined up for another invitation to jam their snouts in the trough at the British passengers expense”. In April he called Stagecoach and Virgin’s joint venture with SNCF “yet another land grab on Britain’s railways by the French state”.
But having foreign companies bid for the franchises is in the government’s interest as it increases competition and gives better value for taxpayers, according to Gerald Khoo, equity researcher at Liberum. HS2 is set to be the first truly high speed rail operation in the UK, and so naturally those British companies looking to run the West Coast Partnership franchise must look to foreign companies that have experience in the area.
