Rail franchise for buy-out team

CHRISTIAN WOLMAR

Transport Correspondent

One of the companies bidding to run rail services is set to win a 15- year franchise, double the normal seven-years, in order to allow it to buy new trains.

The management buy-out team bid for the London, Tilbury and Southend railway, which has successfully fought off three private sector bidders, is based on the premise that a 15-year term is necessary to allow the purchase of an entire new fleet of trains. The franchise director, Roger Salmon, is in the final stages of negotiations with the team and it is thought that the deal would require the new operator to provide the trains within a given timetable or revert to a seven-year deal.

The decision shows the extent to which the Government is prepared to alter the rules in order to encourage new investment on the railways. The commitment to obtain new trains from the private sector would be a feather in the cap for the privatisation initiative, especially after the criticism earlier this week from the Sea Containers president, James Sherwood, who said that privatisation would not help bring investment to the "deteriorating rail network". Sea Containers had unsuccessfully sought 12-year contracts on two lines.

All bids to run lines involve asking for subsidy to provide the service and while most of the bids entered so far have been for more subsidy than currently paid to BR, it is thought that those for LTS were all for less than the current level of pounds 14.8m (on turnover of pounds 53m).

Meanwhile, it has emerged that a surprise bidder, Resurgence Railways, is the favourite to win the contract for Great Western Trains.