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Stagecoach’s east coast escape

Days after losing the licence to run £1 billion-a-year South West Trains, Stagecoach appeared to be close to easing the burden of its 90 per cent-owned Virgin East Coast rail franchise.

The operator is significantly behind on its passenger growth projections on the London to Edinburgh mainline on which it has promised to pay more than £3 billion in excess profits to the Treasury through to 2023.

Since privatisation two previous operators have been forced to hand back control of the franchise to the Department for Transport.

Analysts at HSBC say they believe that Stagecoach is close to a deal with the department to end its ambitious programme of payments. Virgin East Coast was meant to generate enough profits to cover a £278 million payment to the Treasury this year rising to £346 million next year and to £600 million by 2023.

Joseph Thomas, of HSBC, said that the most recent 18-week growth rate was about 5 per cent against a projected 8 per cent to 9 per cent.

A deal before the launch of the Hitachi-built Azuma intercity express on the line next year would be a blow to Stagecoach’s reputation.

However, the City believes it would be good news for investors and a statement from Stagecoach that it was “working constructively . . . to manage contract changes” was taken positively. Its shares jumped 8½p to 207¾p.