Government to take control of East Coast Main Line from Stagecoach Group

East Coast trainline

It will effectively mean trains being run by the Department for Transport through a so-called "operator of last resort", while a new public/private partnership is established.

Grayling said that the government is willing to take tough decisions when necessary and added: "Mr Speaker, I have also taken official advice about the future of the passports now held by Virgin Holdings and Stagecoach, determining whether they are fit and proper to operate on our railways".

The current InterCity East Coast franchise held by a joint venture of Stagecoach Group (90%) and Virgin Holdings (10%) will be terminated on June 24, Secretary of State for Transport Chris Grayling informed the House of Commons on May 16.

Grayling told MPs that the business would be "publicly run for a short period", mirroring the period between 2009 and 2014 when Directly Operated Railways managed ICEC services under the East Coast brand.

Today Chris Grayling announced that the East Coast Mainline will be temporarily run by the government after being privatised by George Osborne in 2015.

Grayling insisted the government's decision to take control of the franchise "was not because the route is failing".

Rail services on the East Coast Main Line will be brought back under state control following the termination of the franchise agreement with Virgin Trains East Coast (VTEC). They will then begin the task of working with Network Rail to bring together the teams operating the track and trains on the LNER network.

Those advocating renationalisation across the piece should be asking themselves whether DOR would have been able to run the service it did had it been obliged to invest as much in the route as did Virgin Trains or if it were having to return as much to taxpayers as Virgin Trains.

"It is now essential Virgin and Stagecoach are barred from bidding for any future franchises".

So, on the same day we will start with the launch of a new long-term brand for the East Coast Main Line through the recreation of one of Britain's iconic rail brands, the London and North Eastern Railway, the LNER.

Stagecoach said it and Virgin had been negotiating for a new contract with the Department for Transport but that it understood Mr Grayling was "no longer considering" them for the deal.

Scottish Liberal Democrat transport spokesman Mike Rumbles MSP said: "Stagecoach failed spectacularly to deliver on its East Coast mainline rail contract, compromising one of Scotland's most important transport arteries".

Critics described the move as a "bail out", with Lord Adonis resigning as chairman of the National Infrastructure Commission after claiming it would cost taxpayers hundreds of millions of pounds in lost payments by the operator.

Stagecoach boss Martin Griffiths said he was "surprised and disappointed" at the government's decision.