Nat Exp east coast to be nationalised

<div>THE loss-making east coast rail line is set to be renationalised after National Express, which currently operates the franchise, failed to renegotiate its funding contract with the Department for Transport (DfT).<br /><br />National Express currently runs services on the line between London and Edinburgh. But the firm is walking away from the line after it failed to renegotiate the &pound;1.4bn it was required to pay the government over the seven-year life of the franchise, which was due to expire in 2015.<br /><br />It said it would book a loss of &pound;20m on the franchise in the first half of the year, after the recession took its toll on passenger numbers, which rose by one per cent &ndash; not the nine per cent it needed to make a profit.<br /><br />Ministers criticised National Express for not making enough cash available to the special purpose vehicle (SPV) through which it ran the franchise, NXEC.<br /><br />Running the contract through NXEC enabled National Express to cap its liabilities at &pound;72m, made up of a &pound;40m loan to the SPV and a bond of up to &pound;32m which is payable on default.<br /><br />The government will step in and manage the firm when National Express fails to make its next payment.<br /><br />In recent weeks, the firm has desperately been trying to cut the &pound;1.4bn it was required to pay the government. Talks failed, prompting chief executive Richard Bowker to quit the firm on Tuesday. Bowker will now help build a &pound;20bn rail network in the United Arab Emirates.<br /><br />&ldquo;This is a failure for Bowker,&rdquo; industry expert Christian Wolmar said.<br /><br />&ldquo;National Express won&rsquo;t be able to bid for the franchise again and has lost its standing as one of the big players in the industry,&rdquo; he added.<br /><br />The DfT will set up a publicly-owned firm to run the franchise once National Express has withdrawn.<br /><br />Transport secretary Lord Adonis said: &ldquo;It is simply unacceptable to reap the benefits of contracts when times are good, only to walk away from them when times become more challenging.&rdquo;</div>
<div><br />The DfT said it would look for a private-sector firm to run the franchise from 2010.</div>