South Western Railway’s (SWR) finances indicate it is “not sustainable in the long term”, Transport Secretary Grant Shapps has said.
The operator’s financial performance has been “significantly below expectation” since the franchise began in August 2017, he said, blaming poor punctuality and reliability combined with slower revenue growth.
Whilst warning that SWR, which made a pre-tax loss of £139m in the year to March 2019, has “not yet failed to meet their financial commitments”, Mr Shapps said his department “must prepare suitable contingency measures”.
That could mean issuing a new short-term contract to SWR’s owners – FirstGroup and MTR – or transferring the operation of trains to public sector body the Operator of Last Resort.
Many will see that as a form of nationalisation, part of the Labour Party’s manifesto at last month’s election.
The firm operates routes between London Waterloo, Reading, Bristol, Exeter, Weymouth, and Portsmouth, as well as Island Line on the Isle of Wight.
SWR’s owners FirstGroup and MTR were awarded the franchise in August 2017, after outbidding previous operator Stagecoach.
In a statement FirstGroup and MTR said: “We continue to be in ongoing and constructive discussions with the Department for Transport regarding potential commercial and contractual remedies for the franchise and what happens next as we seek to ensure the right outcome for our customers, our shareholders and the government.”
The RMT union, which is in dispute with SWR over the role of guards on its trains, said the government was “throwing good public money after bad and trying to breathe life into the rotting corpse of privatised rail”.
General secretary Mick Cash said: “Instead of dreaming up new ways to subsidise private sector profits by attacking civil liberties, [Grant Shapps] should stop pushing cost-cutting driver only operation and bring SWR into public ownership, running it in the interests of passengers and workers not his mates in the City.”