GNER to be stripped of East Coast trains licence

THE government has agreed to tear up GNER's £1.3 billion franchise to run the East Coast main line.

The Department of Transport (DfT) has decided to re-let the contract for the service, which includes train services between Edinburgh and London.

But in order to avoid any impact on passengers, the DfT has agreed to let GNER to continue to run it for a further two years on a new fixed-management-contract basis, according to a report today.

Talks are under way to agree the terms of the new arrangement, which is expected to run for between 18 and 24 months until a new invitation to tender can be produced and a train operating company selected.

Change to the existing franchise agreement was needed because of financial problems at GNER's parent company Sea Containers.

It filed for Chapter 11 bankruptcy in the United States last month and has outstanding debts of in excess of 350 million.

Although GNER has a separate contract with the Government and separate banking arrangements, it was thought that its financial situation is unsustainable under the terms of the current contract.

Christopher Garnett, GNER's former chief executive, has admitted that the firm overbid for the franchise in order to beat off rivals.

A spokesman for GNER was unavailable for immediate comment. The Government has stated repeatedly that it does not renegotiate rail franchises as a matter of policy.