The Observer has reported that FirstGroup is ‘considering handing back the £1.1bn First Great Western rail contract three years ahead of schedule’ because the ‘economic downturn and delays in the introduction of the new generation of intercity trains threaten the viability of the franchise.’
The newspaper claims that there is a ‘unique break clause’ in the franchise contract that allows it to end in 2013 instead of 2016. This would save the company am estimated £826m in payments to the Government for the duration of the contract.
FirstGroup are apparently considering ending the contract due to the delay in the acquisition of new rolling stock and weak demand from customers. Their revenue targets are already being missed and FirstGroup need to decide by the end of this year whether or not to end the franchise.
The article claimed that ‘FirstGroup is not seeking to renegotiate the contract after National Express’s attempts to haggle over the £1.4bn East Coast franchise in 2009 ended in failure. National Express relinquished the loss-making deal, lost its chief executive and narrowly avoided exile from the passenger rail market.’
