Train operators' shares tumble as investors grow fearful

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Shares in train operating companies fell sharply yesterday as investors grew fearful that the collapse of Railtrack presaged a much tougher line from ministers over subsidies for the industry.

Go-Ahead, the operator of the Thames Trains, Thameslink and South Central franchises lost 10 per cent of its value whilst shares in FirstGroup, operator of three franchises including Great Western, slid 6 per cent. National Express, the biggest train operator in the country with nine of the 25 franchises, fell 4 per cent.

The fallout from the Government's decision to place Railtrack in administration was also felt amongst maintenance contractors to the rail infrastructure group, with the share prices of Balfour Beatty, Jarvis and Amec also taking a battering.

Despite the adverse market reaction, some rail industry observers said that the demise of Railtrack could be good news for the passenger franchise operators, giving them a bigger say and greater control over how the network is run.

The Government has already approached National Express to sound it out about taking over responsibility for the track and signalling used by its ScotRail, Midland Main Line and Anglia franchises. Stagecoach is also understood to have been approached about taking charge of South West Trains' infrastructure. Stephen Byers, the Secretary of State for Transport, is understood to be keen to introduce more vertical integration of "track and wheel" on sections of the network where there is largely just one train operator.

Virgin Trains may also be given a greater say in the management of the west coast main line upgrade, although it now seems likely that the £7bn project will be scaled back in size. The plan had been to upgrade the line in two phases, first to 125 mph by 2002 and then to 140 mph by 2005, to allow for more trains per hour. It now seems likely that the second phase will be scaled down and possibly scrapped altogether. That would entail substantial compensation being paid to Virgin.

Richard Bowker, the managing director of Virgin Trains, saw Railtrack's administrators yesterday and has received guarantees that the demise of the company will not affect services on the line or the upgrade work currently taking place.

Balfour Beatty and Jarvis both said they had been assured that their Railtrack work programmes would not be affected.