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Sunday 09 June 2019 2:17 pm  |  Updated:  Sunday 09 June 2019 2:18 pm

First Group ‘may sue government’ if no deal on South Western Railway franchise contract

By: Alex Daniel

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First Group has hit back at activist investor Coast Capital amid pressure that has seen it sell off Greyhound buses
LONDON, ENGLAND - AUGUST 15: A Virgin train prepares to depart from Euston Station on the West Coast Mainline route on August 15, 2012 in London, England. Virgin Rail has been outbid by FirstGroup, UK's largest train operator, to continue running the West Coast Mainline franchise which it has done for the past 15 years. FirstGroup bid 5.5 billion GBP to run the lucrative route between London and Scotland via the West Midlands that serves 31 million passengers annually. FirstGroup will take control of the franchise from December 9, 2012 and are due to to operate the service until 2026. (Photo by Oli Scarff/Getty Images)

First Group is open to suing the government if the two cannot agree terms on its South Western Railway franchise.

Responding to reports the company could bring legal action, a spokesperson said any suggestions of this were “purely hypothetical”. First Group’s new boss Matthew Gregory had told the Sunday Times if the two sides could not negotiate an agreement he would “have to turn to other means”.

Read more: Activist investor hits back at First Group claims

First and Chris Grayling’s Department for Transport are renegotiating the contract for the South Western Railway franchise, which First Group won with Hong Kong operator MTR. The original terms included a promise to pay the government £2.6m in premiums. It was based on growth of about seven per cent per year.

But track and signalling issues, strikes and the timetable crisis which struck last year have hampered business. Passenger numbers have missed original targets.

First Group hoped the original contract would protect it from falling GDP and central London employment. Clauses ensuring this have not been triggered, however.

As a result, Gregory last week wrote down £102m of future losses from the franchise.

“We prefer to work with our customer to find resolution through discussion and negotiation. If there’s a contractual issue that we are unable to deal with through negotiation, we would have to turn to other means.”

Read more: First Group launches attack on activist investor

A spokesperson told City A.M: “We have a strong track record in industry partnerships, and have always worked constructively with the Department for Transport.

“Our preferred option to agree any contractual remedies would always be to engage in discussions with the DfT and any suggestion of legal action is purely hypothetical.”

The government is already facing a number of legal claims over rail franchises. Stagecoach and Arriva are already suing after they missed out on the East Midlands contract.

Read more

UK fintech Pockit recruits founder of Burger King Kazakhstan

Burger King restaurant exterior with logo and drive-thru lane, reflecting fast food industry presence.

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