Government takes over Southeastern Trains after £25m franchise agreement breach

Government temporarily renationalises LSER after company fails to declare £25m of historic taxpayer funding.

The government will take over running rail services on Southeastern from 17 October 2021, after a serious £25m breach of the franchise agreement’s “good faith” obligation was identified.

An investigation conducted by the Department for Transport found that since October 2014 London & South Eastern Railway (LSER) has not declared over £25m of historic taxpayer funding which should have been returned.

To date £25m has been recovered and further investigations are being conducted by the owning group into all related historic contract issues with LSER. Following these investigations, the government will consider further options for enforcement action, including statutory financial penalties under the Railways Act 1993.

Ministers say that, on the basis of the available evidence, the decision to effectively renationalise the LSER service, albeit temporarily, makes clear that the government will hold private sector operators to the highest standards, and take swift, effective and meaningful action against those who fall short.

Transport secretary Grant Shapps, said: “There is clear, compelling and serious evidence that LSER have breached the trust that is absolutely fundamental to the success of our railways. When trust is broken, we will act decisively. The decision to take control of services makes unequivocally clear that we will not accept anything less from the private sector than a total commitment to their passengers and absolute transparency with taxpayer support.”

The running of services will be transferred to the government’s in-house Operator of Last Resort (OLR), details of which will be “set out in due course.”

Shapps also said that passengers and staff can be reassured that there will be no changes to fares, tickets or services. He said: “Today’s decision will also have no impact upon the exceptional frontline staff of LSER, who have been at the frontline of delivering services throughout the Covid pandemic. The decision is no reflection on their professionalism and dedication and will not affect jobs.”

Looking further ahead, Shapps said: “In future, we will move the services back into the private sector on a new Passenger Services Contract, allowing private sector investment and innovation to lead the way in delivering a regional railway that works for its passengers.”

Southeastern, which runs services between London, Kent and East Sussex, is operated by Govia, a joint venture between transport operators Go-Ahead and Keolis. Go-Ahead shares fell more than 22% as the news was announced, while the firm announced Elodie Brian has resigned as group chief financial officer and will be standing down from the board with immediate effect.

Clare Hollingsworth, Go-Ahead's chairman, said: "It has always been this group's intention to provide the best possible public transport, and to work in partnership with the government and related agencies. We recognise that mistakes have been made and we sincerely apologise to the DfT. We are working constructively with the DfT towards a settlement of this matter."

As a direct consequence of ongoing discussions with the DfT regarding the LSER profit share, Go Ahead has also postponed the announcement of the group's results for the year ended 3 July 2021, which had been scheduled for this week. (30 September 2021). The company says a revised announcement date will be confirmed in due course.

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