Tuesday 7 January 2020 3:22 pm

South Western Railway's future at risk as losses hit £137m

South Western Railway is on the brink of collapse, its auditor has warned after it swung to a massive £137m loss in its latest financial year.

Deloitte warned there is “significant doubt” over the future of the strike-hit firm, which could be nationalised by the Department of Transport (DfT) in order to keep its rail franchises running.

Read more: South Western Railway’s December strikes run through to Christmas

South Western suffered a month of strike action in December in a miserable run up to Christmas for commuters, which led to services being cancelled and delayed.

In accounts filed to Companies House earlier this week and first reported by the Telegraph, the rail operator revealed losses of £136,948m in the year to March 2019, driven largely by a £146m fall in the estimated value of a contract. 

That came despite the operator seeing revenue top £1.1bn, representing six per cent like-for-like passenger growth from 2018, when it also counted a profit of £7m.

South Western said delays to timetable changes initially due in December 2018 hit its performance, as well as a “significant and unforeseen change in circumstances”. The company lost XXX rail franchise last year.

Issues like infrastructure reliability and strike action also hurt the firm.

Deloitte warned: “Since year end the company has continued to be loss0making and current forecasts indicate that losses will exceed the amount of the onerous contract provision within 12 months from the date of approval of these accounts.”

The report added: “The directors have concluded that there is a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern.”

However, South Western said it holds a “reasonable expectation that the discussions with the DfT will have a positive conclusion”.

The government could force First Group and MTR to submit proposals for a short-term contract to keep running South Western’s rail franchises.

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A company spokesperson said: “South Western Railway’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. As set out previously, First Group and MTR have already provided for the maximum unavoidable loss.”