Northern Rail is in financial trouble and could collapse within months, said UK Secretary of State for Transport Grant Shapps.
In a written statement to parliament, Shapps stated that Northen rail franchise “will only be able to continue for a number of months.”
In October, he requested for a proposal from Arriva Rail North (ARN), which is the operator and parent company of Northern franchise, and the Operator of Last Resort to explore options regarding the franchise, due to the financial condition of ARN.
Shapps is in the process of evaluating the proposal from ARN and will then decide whether to issue a short-term management contract.
Based on the decision, the UK Department for Transport’s (DfT) Operator of Last Resort could assume operations of the rail franchise.
Shapps will make his decision regarding the future of the rail company after Williams Rail Review submits its recommendations.
The four key principles of protecting passenger interests, safeguarding business and service continuity, preserving the interests of taxpayers with value for money, and the continued quality of the franchise proposition will influence his decision.
DfT expects to issue its decision regarding Northern Rail by the end of this month.
He stated: “To clarify, the current financial position of the Northern franchise will not impact on the railway’s day-to-day operations. Services will continue to run and there will be no impact on staff.”
In May, Greater Manchester Mayor Andy Burnham and Liverpool Metro Mayor Steve Rotheram urged the government to terminate the Northern rail franchise.
In response to Grant Shapps’ discussions regarding the future of the rail on TV and Radio on 2 January, Northern and DfT released their statements.
Northern managing director David Brown said: “It’s on record that the Northern franchise has faced several material and unprecedented challenges in the past couple of years, outside the direct control of Northern. The most significant of these is the ongoing, late delivery of major infrastructure upgrades.”
He added: “These factors, alongside the damage caused by strike action and lower than expected economic growth, have had a significant effect on the revenue expected in our original franchise business plan agreed with the government back in 2015.
“That’s why the Government has asked us to prepare a business plan for a shorter ‘Direct Award’ which will see the completion of our transformation programme.”