England’s trains have effectively been nationalised, at least temporarily, after the government suspended rail franchise agreements to avoid train companies collapsing because of the coronavirus.
Under emergency measures announced by the Department for Transport (DfT), train operators have been offered the chance to transfer “all revenue and cost risk” to the government and be paid a small management fee to continue running services.
The industry body the Rail Delivery Group (RDG) said it “strongly welcomes” the proposals, which boosted the share prices of listed companies with rail franchises, such as FirstGroup and Go-Ahead.
While the measures are temporary, they nonetheless signal the permanent end of England’s complex rail franchising system, which was already likely to be abolished by the government commissioned Williams review.
The emergency protocol will be in place for an initial period of six months, the DfT said, in order to “minimise disruption to the rail sector”.
Allowing operators to enter insolvency would cause “significantly more disruption to passengers and higher costs to the taxpayer”, the department added.
Shares in the rail operator Go-Ahead surged by 17% as a result of the government taking on responsibility for its franchises, Govia Thameslink and Southeastern, despite the company cancelling its dividend to conserve cash.
The shares of FirstGroup, which runs Great Western Railway, South Western Railway, TransPennine Express and Avanti West Coast but also has bus services affected by school closures, rose less rapidly but still climbed more than 5%.
FirstGroup’s chief executive, Matthew Gregory, welcomed “swift and comprehensive” measures from the government and said the company had accepted its offer.
The shares of Stagecoach, which was already planning its exit from UK rail amid a legal dispute over franchise awards with the government, fell by 4% by mid-morning as it, too, scrapped its shareholder payout.
The DfT said passenger numbers had fallen by up to 70%, while ticket sales were down by two-thirds on the same period of 2019. Commuters who stay at home to help prevent the spread of coronavirus will be offered refunds on season tickets, the government has said.
Train services have been cut back from Monday on the back of government advice to avoid all non-essential travel to stem the outbreak of Covid-19. The advice was updated on Sunday to include “second homes, campsites, caravan parks”.
The transport secretary, Grant Shapps, said: “We are taking this action to protect the key workers who depend on our railways to carry on their vital roles, the hardworking commuters who have radically altered their lives to combat the spread of coronavirus and the frontline rail staff who are keeping the country moving.
“People deserve certainty that the services they need will run or that their job is not at risk in these unprecedented times.
“We are also helping passengers get refunds on advance tickets to ensure no one is unfairly out of pocket for doing the right thing.
“These offers will give operators the confidence and certainty so they can play their part in the national interest.”
The department said fees paid to rail firms by the government during the emergency measures were intended to incentivise them to meet performance targets and the maximum fee attainable will be “far less than recent profits earned by train operators”.
The RDG chief executive, Paul Plummer, said: “The industry strongly welcomes the Department for Transport’s offer of temporary support and, while we need to finalise the details, this will ensure that train companies can focus all their efforts on delivering a vital service at a time of national need.”
• This article was amended on 24 March 2020 because an earlier version referred to Britain and to the UK. In fact the DfT announcement relates to England only.