Government suspends rail franchises for next six months

Coronavirus: Train operators will run services for management fee while passengers will receive refunds on season tickets and advance bookings

Grant Shapps

Grant Shapps

The government is taking emergency measures to support and sustain necessary rail services as operators face significant drops in their income.

The Department for Transport (DfT) will temporarily suspend normal franchise agreements and transfer all revenue and cost risk to the government for a limited period, initially six months.
Operators will continue to run services day-to-day for a small predetermined management fee. Terms and conditions of employment for rail workers will not change.

Transport secretary Grant Shapps said this move will ensure that trains necessary for key workers and essential travel continue to operate. No other passengers should travel. As announced over the weekend, rail services will be reduced from today (23 March 2020).

Anyone holding an advance ticket will be able to refund it free of charge. All season ticket holders can claim a refund for time unused on their tickets free of administrative charges. Ticket holders should contact their operator for details.

The railways have already seen up to a 70% drop in passenger numbers. Rail fares revenue has also reduced as people increasingly work from home and adopt social distancing, with total ticket sales down by two-thirds from the equivalent date in 2019.

The DfT said it has taken today's action to minimise disruption to the rail sector, vital to the wider UK economy, through these difficult times. Allowing operators to enter insolvency would cause significantly more disruption to passengers and higher costs to the taxpayer. The management fee will allow operators to act in the national interest in tackling COVID-19.

Fees will be set at a maximum of 2% of the cost base of the franchise before the COVID-19 pandemic began, intended to incentivise operators to meet reliability, punctuality and other targets. The maximum fee attainable will be far less than recent profits earned by train operators. In the event that an operator does not wish to accept an Emergency Measures Agreement, the Government’s Operator of Last Resort stands ready to step in.

Transport secretary Grant Shapps said: “We are taking this action to protect the key workers who depend on our railways to carry on their vital roles, the hardworking commuters who have radically altered their lives to combat the spread of coronavirus, and the frontline rail staff who are keeping the country moving.

“People deserve certainty that the services they need will run or that their job is not at risk in these unprecedented times. We are also helping passengers get refunds on advance tickets to ensure no-one is unfairly out of pocket for doing the right thing. These offers will give operators the confidence and certainty so they can play their part in the national interest.”

Paul Plummer, chief executive of the Rail Delivery Group, which represents train operators and Network Rail, said: “The rail industry is working together so that people and goods can keep making essential journeys during this unprecedented national challenge, getting key workers to hospitals, food to shops and fuel to power stations.

“The industry strongly welcomes the Department for Transport’s offer of temporary support and while we need to finalise the details, this will ensure that train companies can focus all their efforts on delivering a vital service at a time of national need.We would like to thank our people, who continue to do an incredible job in difficult circumstances.”

Transport secretary's statement on railways

In a written statement transport secretary Grant Shapps outlined rail emergency measures during the COVID-19 pandemic

In these uncertain times, the railway has a vital role to play in ensuring Britain’s key workers can travel and vital supplies are kept moving. My absolute focus is on making sure services continue so that journeys that are vital in tackling this crisis can continue to take place, so today (23 March 2020), to make sure our railways stay open, we are providing train operators on franchises let by my department the opportunity to temporarily transition onto Emergency Measures Agreements.

These agreements will suspend the normal financial mechanisms of franchise agreements, transferring all revenue and cost risk to the government. Operators will continue to run day-to-day services for a small, pre-determined management fee. Companies entering into these agreements will see a temporary suspension of their existing franchise agreement’s financial mechanisms for an initial period of six months, with options for further extension or earlier cancellation as agreed.

Today’s offer will provide greater flexibility to the train operators and the government and make sure the railway can continue to react quickly to changing circumstances and play its part in serving the national interest. It will ensure vital services continue to operate for key workers who are keeping the nation running and that we are able to reinstate a normal service quickly when the situation improves.

In the longer term these agreements will also minimise disruption to the rail sector. The railways have already seen up to a 70% drop in passenger numbers, with rail fares revenue reducing as people increasingly work from home and adopt social distancing, and total ticket sales down by two-thirds from the equivalent date in 2019. Suspending the usual financial mechanisms will not only guarantee that services can be sustained over this difficult period, it will also provide certainty for staff working on the railways, many of whom are working hard every day in difficult conditions to make sure we keep the railway running.

This is not a new model, it is a temporary solution, taking the steps necessary to protect services now in a cost-efficient way, and ensuring current events have as little impact as possible on the railway in the longer term. Allowing operators to enter insolvency would cause significantly more disruption to passengers and higher costs to the taxpayer.

Fees will be set at a maximum of 2% of the cost base of the franchise before the COVID-19 pandemic began, intended to incentivise operators to meet reliability, punctuality and other targets. The maximum fee attainable will be far less than recent profits earned by train operators. In the event that an operator does not wish to accept an Emergency Measures Agreement, the Government’s Operator of Last Resort stands ready to step in.

Alongside our focus on keeping the railways open to support key workers, we recognise there will be many who have heeded government advice and chosen not to travel. We don’t want people to lose money for doing the right thing, so I am also announcing today that passengers will be able to get refunds for advance tickets they aren’t able to use while the government advises against non-essential travel.

We have agreed with all the train operators that passengers who have already purchased an advance ticket will be eligible for a refund without any charge. Those holding a season ticket that they no longer wish to use will also be eligible for a partial refund, determined by the amount of time remaining on the ticket. Ticket holders should contact their operator for further details.

Given the significant timetable changes that have put been in place we are also asking operators to use discretion to allow passengers with advance tickets to travel on an alternative train at a similar time or date if their ticket is technically no longer valid as a result of cancellations, but they still wish to travel.
We are operating in extraordinary times, but today’s announcement will make sure key workers who depend on our railways are able to travel and carry on their vital roles, that hardworking commuters - who have radically altered their lives to combat the spread of coronavirus, are not left out of pocket, and it will provide certainty to the industry’s staff who are still working hard every day to make sure the railway plays its part in tackling this crisis.