Serco and Dutch team win £3.6bn Merseyrail deal

The Dutch are to take over the running of the commuter rail network on Merseyside under a 25-year, £3.6bn contract announced yesterday.

A joint venture between Ned Railways, the international arm of NS Dutch Railways, and Serco, the operator of the Docklands Light Railway in east London, beat off competition from two other foreign bidders for the Merseyrail concession.

Merseyrail carries 24 million passengers a year – making it the most heavily used commuter network outside London. It is also one of the most heavily subsidised franchises in the UK, receiving some £90m a year in taxpayers' support.

The 25-year concession starts in July and marks the first time that the Dutch have entered the UK rail market. Details of the service improvements Ned Railways and Serco have offered were sparse although a Merseytravel spokesman said they would make increased staffing and security a priority along with improved train reliability.

Special legislation introduced by the Government means that the franchise is being let through Merseytravel, the local transport authority for the region, rather than the Strategic Rail Authority. For the first time, penalties imposed on the franchise operator for poor performance will be ploughed back into the network rather than handed over to the Treasury.

The two other shortlisted bidders were a joint venture between Keolis, part of the French state railway SNCF, and GB Railways and a consortia involving the operator of the Paris Metro, the RATP, and Transdev, also of the Netherlands.

Arriva, the existing franchisee on Merseyside, was not shortlisted – the first time that an incumbent operator has been denied the opportunity to retain its concession. Keolis and GB Railways have been kept in the competition as reserve preferred bidder in case Merseytravel, the SRA and the Dutch consortium are unable to agree final terms in the next two weeks.

Ned Railways' parent company carries one million passengers a day on the Dutch rail system and covers the commuter areas of Amsterdam, Rotterdam, the Hague and Utrecht. As well as the Docklands Light Railway, Serco also operates the Manchester Metrolink.

During the preparation of their bid, senior managers from Ned Railways spent several months on Merseyside, commuting on Merseyrail in order to get a proper feel of the problems faced by passengers.