UK train firms sign government contracts that save them for 6-18 months

Lianna Brinded
·Head of Yahoo Finance UK
·2-min read
Railway trains, operated by South Western Railways run by the FirstGroup Plc and MTR Corp. Ltd. franchise, sit at platforms at London Waterloo railway station in London, U.K., on Thursday, May 21, 2020. Photo: Simon Dawson/Bloomberg
South Western Railways trains at London Waterloo station. Photo: Simon Dawson/Bloomberg

UK train companies Go-Ahead (GOG.L) and FirstGroup (FGP.L) revealed that they have signed new contracts with the government to keep running rail services for the next 6-18 months.

Since the onset of the coronavirus pandemic, passenger numbers have fallen due to a nationwide lockdown. While that lockdown has eased over the last couple of months, the number of people going back to the office still remains low as companies weigh up whether staff need to go into a physical office environment versus working from home.

This has had an impact on travel firms — from domestic public transportation services, to airlines.

For example, in April, Network Rail revealed that footfall was down an average of 93% at some of London’s busiest stations, rising to 96% during weekends. In June, rail passenger numbers in the UK fell last year to 1.7 billion in the biggest decrease since privatisation in the 1990s, according to figures published by the Office of Rail and Road.

However, under the new contracts, FirstGroup and Go-Ahead will not be exposed to the impact of changes in passenger demand because the government will pay the companies to run services over this period.

"This contract reaffirms the government's recognition of the important role rail plays in driving economic growth and in connecting communities,” said David Brown, CEO of Go-Ahead in a statement.

“Independent passenger surveys have found that people who have recently travelled on our services found them to be clean, safe and reliable. We look forward to welcoming more passengers back onto our trains."

FirstGroup CEO Matthew Gregory said in a statement: “The government has extended its funding of the rail industry whilst demand for services remains heavily affected by coronavirus, and we are pleased that the vital nature of rail services to communities and local economies is being recognised.

READ MORE: No deal Brexit 'final nail in the coffin' for UK manufacturers

“Passengers can be confident that public transport is safe and across our rail networks we have increased service levels to provide more capacity as schools restart and many more workplaces and other facilities reopen.

“We are now operating around 90% of the rail services we were prior to the pandemic. We will continue to bring all our expertise to bear alongside government and industry partners to deliver the next phase of recovery of the rail network.”