Posted 14th March 2011 | 16 Comments

First Great Western may bow out three years early

IT’S being suggested that FirstGroup may take advantage of a break clause in its Great Western contract by bowing out three years early – potentially saving £1 billion or more in premium payments.

The delay in the introduction of Intercity Express – now expected in 2015/16 – and weaker than expected revenue are thought to be the reasons for the Group’s change of heart.

A spokesman is reported to have said: "We have to make a decision before the end of the year as to whether we are going to exercise our contractual right to extend the FGW franchise to March 2016.”

First took charge of Greater Western in April 2006. The contract included the former Great Western intercity routes, plus Wessex Trains and Thames Trains.

In January 2006, the Department for Transport was predicting that 779 million journeys would be made during ‘the ten year franchise’, without referring to the possibility that it could end early.

The last available figures, for 2009-2010, are published in the ORR’s National Rail Trends. This reports that FGW is slightly ahead of the original prediction, with 83.9 million journeys being made in twelve months – a rise of 0.2 per cent from the previous year. The number of staff fell by 3.1 per cent, to 4,713.

It received subsidies of more than £150 million in the first three years, but premiums began to be payable in 2009-10. Although the first annual payment of some £20 million was comparatively modest, the amounts due rise sharply after that, reaching £111 million in the current financial year and £168 million in 2011-12.

However, most of the premiums are due in the last three years, following the break point. Figures published by the Public Accounts Committee of the House of Commons in 2007 showed that FGW is due to pay almost £1.1 billion between 2013 and 2016, at November 2005 prices.

FGW is currently receiving a rebate of part of the premiums due, under ‘cap and collar’ revenue protection clauses, because its income is lower than expected.

The amounts payable can also change mid-franchise as a consequence of the ORR’s Periodic Reviews of Network Rail’s budgets, which can affect track access charges, but the 2007 figures will still be reasonably indicative.

Reader Comments:

Views expressed in submitted comments are that of the author, and not necessarily shared by Railnews.

  • Frank Lee Appalled, Reading

    The rail privatisation was a Tory thing, Labour under socialists ( you may remember them!) vowed to return the rail to government control...yeah right!

    The railways were sold off in the Tory "let's sell *everything* so we can balance the books so it looks as if we're wonderful" period.

    That said, Labour under the grinning idiot Blair didn't return the rail services to the people, even when he had the chance to following the collapse of Railtrack.

    It galls me that a company can bid for a contract, lasting years, pay dividends to shareholders and still take subsidies from us. While all the time increasing fares above inflation.

    I have just paid £46 to buy a ticket from Reading to Paddington on Thursday, how can they tell us that in a train where there will be standing room only that they make a loss? What are they spending the money on?

  • James, Surrey

    FGW. Where do we start. As already commented above. The MK3 (HST) referbishment is a disaster. The managers who signed that off should be ashamed , these coaches have been ruined and a journey down to Cornwall is now hell, all for the Paddington Reading capacity problem. Why not hire some stored coaches, top and tail with a couple of 67s and run some "crowd buster" shuttles between Reading and Padd during the peak, taking the strain off the longer distance services

    REVENUE: They hold their hands out for "revenue support". "We're not taking as much as we thought" at the same time their nework leaks money like a sieve. Virtually zero revenue protection. Overwhelmed conductors on trains, if there is one, or can be bothered. People "playing the game" Get in up the front. He'll never get to me!!ect. You can just see the fares walking out the door , millions a year!! The North Downs line for example or Exeter to Newton Abbot. Paddington (very easy to access any platfom without a ticket even with barriers) and Reading

  • Jack, Newport, Wales

    I am sorry, I am so sorry, but an insider for FGW has stated that this is just a move to scare the government (because they all have shares in First), so that the government gives First a cheaper deal on the franchise... First will still rule. I share the views of everyone here... They are untimely, expensive, uncomfortable, stupid, ignorant etc etc, and the Revenue Protection officers are the cockroaches of the railway. First should not be allowed to run trains... This has been proven time and time again, but the customers views are always silences, and First always wins.

  • Peed Off, Brighton

    Outrageous, another balls up by the Labour government, this kind of fiscal abuse by private companies on the British Tax Payer needs to stop. Start would be telling the company to Foxtrot Oscar right of when they come back for another bid. I'll run the franchise as its win win win at the expense of everyone else. Ridiculous!

  • Nick, Truro

    I have always believed, fromthe outset, that the whole privatisation of our railways was a farce, a classic Whitehall farce infact. This latest example of the inemptitude of the system highlights once again that it is the nation and the rail user that looses out.

    Drawn up by people with no more idea of how to run a railway system than childhood recollections of running model railways. The whole system of subsidies, rebates, contracts and break clauses - of passengers becoming customers and Guards conductors - of rolling stock leasing and nationalised infrastructure companies, all is symptomatic of an idea prepared by people who were, at best, free of the ravages of intelligence.

    The only long term winners out the whole exercise are the makers of paint - oh, and the lawyers.

    A not for profit, state sponsored, country wide TOC to progressively take over abandoned franchises, failed operators and contractors as well as Network Rail would be ever so good to see.

    I wonder how long it would take to bring everything back into one organisation?

  • Don Parker, York, England

    First Group should not be allowed anywhere near rail services - they are a complete disaster - lessons should have been learnt when they made a total mess up of the north western trains services - now they are sneaking off - good riddance to them the railways of Britain will be a far better place without them

  • Steve Alston, Manchester

    Hand one back hand them all back. Lessons should have been learnt from the mess they caused at First North Western.

    I'd say they should stick to running bus companies, but that's not fair on bus passengers either.

  • terrythetrainspotter, Hull

    I have an idea,the Dft should create a a group to run the franchise when it stops, then as each other franchise ends give them to this group and make it all "NON PROFIT" and maybe call this group "British Railways"

  • John Kelvin, oxford

    Whoever takes over, let's hope the very first thing they do is reverse engineer the truly appalling "refurbishment" FGW made to the interiors of their Mk 3 coaches. No more lighting so bright it reflects on the windows to the extent it is impossible to see out, no more just two tables per carriage, no more absolute minimum legroom, no more repulsive strange mauve and pink shades covering every possible internal component. (And no more "graffiti" external colour scheme - shameful for the world's first mainline - what would Brunel think). I know the capacity arguments for peak trains Paddington to Reading. But people also use them Paddington to Penzance, and would appreciate significantly more comfort.

  • Fuzzed, Plymouth, UK

    Firstgroup are the 'worstgroup'! They dont run buses that well either. They had the perfect opportunity to provide real integration with buses and trains along the Great Western route and couldnt even do that.

    These companies are here to simply line the pockets of their share holders and dont give diddly squat about their passengers.

    I think it is time that all franchises are run by 'not for profit' companies, this would allow any money that is earnt over and above what is needed to pay staff and run the trains could be invested in a new fleet of trains.

    But then that would be too simple for our government!!

  • M Windebank, Canvey Island, England

    Would help speed up the transfer of services which will form Crossrail from FGW to TFL and with electrification now confirmed beyond Reading then extension of Crossrail to Reading and maybe Oxford would become an option.

    With transfer of Ealing to Southall branch to TFL who could upgrade it to either a Tram or Light Rail line thus beginning the genesis of a West London Tram or DLR network. Other local lines could be added to the Overground network leaving the new franchise to be Mainline Inter city and cross country only.

  • Joel Kosminsky, London, Britain

    Please may we now stop pretending trains run for passengers, when FGW may be giving up for finance reasons?

  • jack99, swindon, UK

    The sooner FGW go the better!

    How to take a once Great Western Railway , BR Western Region and downgrade it by , fobbing off your passengers with inflated fares, poor service , late and uncomfortable trains , take the money and once the going gets tough cry wolf and pull the plug. I give First Group 5 * for commercial acumen 0* for just about everything else. The real losers are the taxpayers for allowing the inept DFT to agree to these terms in the first place.

  • andrew, cheam, united kingdom

    Brilliant News,Good Riiddance To Bad TOCs! But Dont Stop There Take Their
    FCC Franchise Away As Well(UKs Worst TOC)

  • Steve, Colchester, UK

    So they take the subsidy, then when it comes time to pay up, they say, no, we'll hand back the keys ?

  • H Harvey, Birmingham

    well well well

    Here we see the true face of the franchise system and the mindset of privateers. Privateers were pirates as I recall and the name seems absolutely appropriate.

    Having had the best of the goodtimes they are about to jump ship with the booty.

    No prospective franchisee will bid better than the freebooters just about to leave making the franchise system very expensive to the ticket payer/taxpayer whilst the reall rogues the DfT accept 'no blame'.