Sir Richard Branson 'devastated' by franchise ban and warns Virgin Trains could vanish

It is because Stagecoach, which partners Virgin Group has been banned from three franchise competitions due to a row over railworkers’ pensions with the Government.

Virgin will cease to run the service in March next year when its franchise runs out.

He said they were considering an appeal but added: “I am devastated for the teams who have worked tirelessly to make Virgin Trains one of the best train companies in the UK, if not the world. Virgin Trains has led in the industry for more than 20 years and we wanted this to continue for many more years.

"Running the railway comes with many challenges and the West Coast Main Line was struggling when we took it over, but we were determined to turn it around.

“We’re baffled why the Department for Transport did not tell us that we would be disqualified or even discuss the issue – they have known about this qualification in our bid on pensions for months."

He said Virgin was at the top of the long distance franchised operators for customer satisfaction – receiving a 90 per cent customer satisfaction rating in the National Rail Passenger Survey and had almost tripled passenger journeys – from around 14m in 1997 to nearly 40m today.

"Our first priority is always to look after our teams. The pensions regulator has warned that more cash will be needed in the future, but no one knows how big that bill might eventually be and no responsible company could take that risk with pensions.

"We can’t accept a risk we can’t manage - this would have been reckless. This is an industry-wide issue and forcing rail companies to take these risks could lead to the failure of more rail franchises.

The winning bidder for the West Coast Partnership franchise - due to be awarded in June - will be responsible for services on both the West Coast Main Line from March 2020, and designing and running the initial HS2 high-speed services from 2026.

Stagecoach said it was informed by the DfT that it has been banned from the East Midlands, South Eastern and West Coast Partnership franchise competitions after submitting non-compliant bids "principally in respect of pensions risk".

Bidders for the franchises were asked to bear the full long-term funding risk on relevant sections of the Railways Pension Scheme, Stagecoach said.

The DfT claimed Stagecoach "breached established rules" and insisted the company is "responsible for their own disqualification".

It added: "We have total confidence in our process."

Dutch state-owned company Abellio will take over the East Midlands franchise from Stagecoach - which has its headquarters in Perth - on August 18.

The West Coast franchise was also being contested by First Trenitalia West Coast, a joint venture between First Rail Holdings Ltd and Italian high speed trains specialist Trenitalia, and MTR West Coast Partnership, made up of MTR Corporation (UK) and Guangshen Railway plus RENFE of Spain.