Serco’s Caledonian Sleeper contract will be scrapped next year

The Scottish Government has canceled Serco’s contract to operate the Caledonian Sleeper seven years ahead of schedule after failing to agree new financial terms for the historic but unprofitable night train service.

Scotland’s Minister for Transport Jenny Gilruth on Wednesday, the decentralized government said it had exercised an option to terminate the franchise deal with the outsourcing company Serco in June next year.

The Caledonian Sleeper operates trains between London and Scotland, with services to and from destinations such as Edinburgh, Glasgow and the Highlands.

The contract change raises the prospect of the Scottish Government stepping in and nationalizing sleeper train service next year, and follows a decision to give train operator ScotRail public ownership during the pandemic.

Mark Ruskell, transport spokesman for the Green Party, which governs with the Scottish National Party in Edinburgh, said Serco’s ouster should be the “first step towards nationalisation”.

Serco signed a 15-year deal to provide the service in 2015, promising to improve the quality of the experience as part of £100m improvements, half of which was funded by the Scottish Government.

Changes included the replacement of aging 1970s wagons with new rolling stock, some with ensuite bathrooms and double beds.

Serco said the franchise was “losing at a loss over the life of the contract” after the new trains were severely delayed and initially extremely unreliable while the coronavirus pandemic had the company grappling with severely reduced ridership.

The company has lost a total of £65m since it took over running the trains eight years ago.

Serco said the 2014 agreement included an option for the company to present new financial arrangements to the Scottish Government halfway through the franchise.

It said the two sides “were unable to reach agreement on these revised terms” which would have placed the Caledonian Sleeper on a “more sustainable financial footing”.

But the Holyrood government said no decisions had been made about nationalisation. Serco raised the possibility of a return under a new financial agreement, saying it would “continue to work with Transport Scotland on options for future management of the service”.

The service was championed by Serco’s outgoing managing director, Rupert Soames, who used it to travel to his native Scotland near Fort William. He announced last month that he would be leaving the company by the end of this year.

Night trains in Britain can trace their history back to the mid-19th century, but the Caledonian Sleeper is one of only two remaining trains, along with a train connecting London and Cornwall.

The 12-hour “Highlander” service to Fort William is particularly popular with tourists and rail enthusiasts. The sleeping car service has traditionally been used by Scottish MPs and colleagues commuting to and from Westminster.

John Whitehurst, managing director of Serco’s transport business, said the company has “completely transformed the service” since winning the order.

“The service that Serco provides today is widely recognized as excellence, providing hotel standard service and accommodations that are known and admired around the world,” he said.

Gilruth said Serco had “generally performed well and significantly improved Caledonian Sleeper’s services over the past seven years”. Serco’s Caledonian Sleeper contract will be scrapped next year

Adam Bradshaw

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