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Transport secretary threatens SWR nationalisation

FirstGroup has a 70 per cent stake in the franchise
January 22, 2020

FirstGroup’s (FGP) co-management of South Western Railway (SWR) was thrown into doubt by transport secretary Grant Shapps, who told parliament that a failure by the franchise to meet its financial commitments could see it transferred into public ownership.

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FirstGroup has a 70 per cent stake in SWR, a joint venture with train company MTR Europe which holds the remaining 30 per cent share. It began operating the franchise in August 2017. It has been dogged by delays, infrastructure problems and industrial action. 

FirstGroup recorded a £145.9m provision in its 2019 full-year results for the SWR contract. In its latest half-year results, the group said that it remained in negotiations with the Department for Transport (DfT) over the franchise. It is also under pressure from the department over its operation of the TransPennine Express.

The minister said that SWR has not yet failed to meet its financial commitments*. But “poor operational performance, combined with slower revenue growth, has led to the financial performance of SWR to be significantly below expectation since the franchise commenced in August 2017”, he told parliament in a written statement. 

The minister said that options available to his department include a new short-term contract with SWR or moving the operation into the care of an ‘Operator of Last Resort’ - a government-owned public sector manager. 

A FirstGroup spokesperson said: “As we indicated in the statutory accounts for SWR released earlier this month, we continue to be in ongoing and constructive discussions with the DfT regarding potential commercial and contractual remedies for the franchise and what happens next, as we seek to ensure the right outcome for our customers, our shareholders and the Government."

"We will be responding to the Government’s request for proposal in the coming weeks.”

*This article has been updated to correct Mr Shapps' comments on SWR's attainment of its financial commitments