More train services could be nationalised when contracts expire on Sunday

More rail franchises could be nationalised when emergency measures introduced after the outbreak of coronavirus expire on Sunday.

The Government-controlled Operator of Last Resort (OLR) is reportedly on standby to take over more services if rail firms decide to hand back their contracts.

Emergency Measures Agreements (EMAs) lasting six months were introduced for all of Britain’s rail franchises in March to keep trains running despite the collapse in demand caused by the pandemic.

These involve the Department for Transport (DfT) taking on franchise holders’ revenue and cost risks, while paying them a fixed fee for operating trains.

This has cost taxpayers at least £3.5 billion.

Officials have been in intense negotiations with train companies over what should happen when the EMAs expire on Sunday.

The DfT is under pressure to reduce the amount that franchise holders are paid.

Labour’s shadow transport secretary Jim McMahon told the Commons on Thursday that £100 million has been paid out to shareholders as a result of EMAs, and “that cannot continue”.

But there is growing speculation that some operators could hand back control of services if the DfT reduces the amount it is willing to pay in management fees.

That would mean the OLR – which already runs Northern Trains and London North Eastern Railway – taking over more franchises, effectively nationalising them.

Mr McMahon said it was “absolutely staggering” that no announcement has been made regarding what will happen when EMAs expire on Sunday.

Transport Secretary Grant Shapps told MPs that “it is not possible to conduct negotiations with nine different operating companies in public”, adding that he would make a statement “as soon as there is something to say”.

Department for Transport data shows demand for rail travel fell to as low as 4% of pre-pandemic levels in April, but has since returned to around 40%.

Even before the crisis, some operators such as South Western Railway were suffering financial difficulties.

The franchise, owned by FirstGroup and MTR, made a pre-tax loss of £139 million in the year to March 2019.

Mr Shapps said in January that its services could be taken into public ownership as its financial statements indicated it was “not sustainable in the long term”.

The Government-commissioned rail review was due to be published in autumn 2019, with a key part expected to be an end to the rail franchising model.

But it has been delayed by December’s general election and the coronavirus pandemic.