Richard Branson hits back at critics after early termination of East Coast rail contract

Virgin founder Richard Branson has launched a staunch defence of the much-criticised Stagecoach/Virgin East Coast rail franchise “bailout”, claiming he and his partners have not “received a penny in dividends” and will in fact lose well over £100m.

Many people have criticised the government’s decision to allow Virgin Trains East Coast to walk away early. In November, ministers announced it would set up a public-private East Coast partnership, despite Stagecoach and Virgin previously agreeing to pay the government to run the service until 2023.

While Branson admitted the partnership did agree to pay £3.3bn to the government over the eight-year franchise, he has cited failures and delays to a “huge upgrade of the infrastructure by Network Rail” which was promised on delivery of the bid. The entrepreneur says “considerable delays” to upgrades, new trains, as well as poor track reliability will cost Virgin significant lost revenue.

In a blog on Virgin’s website, Branson said: “The critics argue that my partners at Stagecoach and I are somehow benefitting from this. The fact is we have both lost significant amounts of money – well over £100m in total – and have not received a penny in dividends. We could swallow those losses and simply walk away from the franchise as others have done before. That would be easier. But it would also be wrong. It would bring an abrupt halt to the investment and improvements which are flowing into East Coast. It would mean more disruption to passengers, communities and our people.  Yes, improvements never happen as quickly as any of us would like.”

One of the fiercest critics since the decision was made in November has been Lord Adonis, who resigned as chair of the National Infrastructure Commission last month. The former Labour minister was quick to launch a scathing attack on the current Transport secretary Chris Grayling a day after quitting as chair on 29 December 2017. Adonis, a former transport secretary himself, lambasted the government’s handling of the East Coast rail franchise, which he dubbed a “bailout”. He has called for Grayling to resign after predicting his position would eventually become untenable, claiming the Stagecoach/Virgin East Coast rail franchise contract termination would cost taxpayers hundreds of millions of pounds. 

Adonis has said he was forced to resign as the government was “trying to silence” him over his criticism of its handling of a multimillion pound rail franchise.

Speaking last week, Adonis said: “I would have been obliged to resign from the commission at this point anyway because of the transport secretary's indefensible decision to bail-out, possibly billions if other loss-making rail companies demand equal treatment. It benefits only the billionaire owners of these companies and their shareholders, while pushing rail fares still higher and threatening national infrastructure investment. It is even more inexcusable given the Brexit squeeze on public spending.”