Virgin and Stagecoach assume control of East Coast rail

<p>The East Coast main line has returned to private ownership after over five years.</p>

A joint venture between Virgin and Stagecoach has officially taken control of the East Coast rail route between London and Scotland.

It marks a return to the private sector for the first time in over five years after the Department for Transport (DfT) took over from National Express in November 2009. The move came into effect on Sunday (March 1st) and will see the trains being run under the name Virgin Trains East Coast. The DfT described the move as being "the best deal for passengers".

This shift back to the private sector has been something that the coalition government has been planning since it assumed power 2010. Despite the DfT maintaining that it is a good move for passengers, Labour has severely criticised the decision. Shadow transport secretary Michael Dugher called it a "hammer blow for passengers, taxpayers and employee alike".

As part of the agreement, Virgin and Stagecoach is committing an investment package of around £140 million over the next eight years. This will include the creation of 23 new services to and from London and 3,100 extra seats added by 2020 to cope with the demand of the morning rush hour.

A DfT spokesman said: "The skills and experience that the private sector provides drives forward innovation and investment, and has helped to transform our rail network into a real success story.

"We are confident that the new East Coast franchise gives the best deal for passengers."

Troubled private sector ownership

The East Coast Main Line has gone through somewhat of a mixed experience with private sector ownership. Between 1996 and 2007, the route was operated by Great Northern Eastern Railway but was forced to give up the contract when it hit financial difficulties in late-2006. This led to the ill-fated National Express ownership.

Ownership of the line lasted less than two years and after National Express failed in renegotiating the terms of the current contract, the route was placed in public hands.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.