The strike-hit South Western Railway (SWR) franchise faces the prospect of nationalisation after its accounts revealed “significant doubt” that it could see out the year without going bust.
The train company’s directors said it was uncertain that it could fulfil the terms of its franchise, while a £146m cash injection from its parent groups was likely to be used up before the end of 2020.
Filings to Companies House from December, published on Tuesday, showed that the train operator, a joint venture between FirstGroup and the Hong Kong-based MTR, lost £137m in the year to March 2019.
SWR directors said in the accounts there was “material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern”. The company’s auditors, Deloitte, signed off the accounts but highlighted the directors’ statement.
SWR’s problems have persisted long beyond the past financial year. Train crews were on strike almost the entire month of December, leaving a little over half of services running. The train operator normally serves about 600,000 passenger trips each day, on lines out of London Waterloo into the Surrey commuter belt and beyond.
The firm has been in talks with the Department for Transport (DfT) to claw back money for losses partly ascribed to infrastructure issues overseen by the government-backed rail system owner Network Rail, the delays in implementing new timetables, as well as industrial action.
The directors said that two potential outcomes of the talks were: giving the company a revised, short-term contract; or seeing it kicked out within the next 12 months in favour of a publicly owned operator. A state operator has already stepped in to run LNER, taking over Virgin Trains East Coast in June 2018 when its losses exhausted the funds provided by its parent company, Stagecoach.
However, the accounts said that “the directors have a reasonable expectation that the discussions with the DfT will have a positive conclusion, and that the company will continue to operate”.
The RMT’s general secretary, Mick Cash, said the government should act to stop one of Britain’s biggest rail franchises “crashing into the buffers”. He said: “Rather than allowing SWR to collapse into chaos RMT is demanding that the existing operator is stripped of the franchise with the public sector taking over as soon as possible.”
The TSSA union’s general secretary, Manuel Cortes, said: “Yet again this is stark evidence that the franchising model on our railways is a complete and utter failure. SWR must come into public hands without delay.”
A FirstGroup spokesman said: “SWR’s recent performance has been affected by issues including infrastructure reliability, timetabling delays and industrial action. We continue to be in ongoing and constructive discussions with the DfT regarding potential commercial and contractual remedies for the franchise and what happens next, in order to ensure we reach the right outcome for the government, our shareholders and our customers.”
FirstGroup is already facing pressure on its TransPennine Express franchise, after mass train cancellations since mid-December as the operator has struggled to implement a revised timetable and introduce new trains. The extent of the problems have seen calls from northern political leaders for FirstGroup to lose its franchise and for the same fate to happen to Arriva, which runs the struggling Northern rail service.
SWR meanwhile is also mired in industrial action related to a long-running row over the future of guards on trains. A new managing director, Mark Hopwood, was installed on Monday, pledging to restore reliability.
