Sunday 14 April 2019 3:45 pm | Updated: Monday 03 June 2019 1:18 am

Stagecoach threatens legal action after rail franchise bids spurned by Chris Grayling

Stagecoach is threatening legal action after the government spurned bids for three rail franchises in a row over pensions.

Lawyers for the train and coach operator have written to the Department for Transport (DfT), which Chris Grayling leads, demanding answers as to why it was barred from bidding for the West Coast, South Eastern and East Midlands franchises.

The East Midland franchise, which Stagecoach currently runs, was awarded to Abellio.

Stagecoach has also requested that the 10-day standstill period that comes after the franchise award be extended by a further 14 days.

Last week the government said Stagecoach, which owns 49 per cent of Richard Branson's Virgin Trains, submitted "non-compliant" bids for the franchises because of its refusal to accept pension liabilities with the government.

Branson said he was "devastated" by the decision, which could see Virgin Trains disappear from the UK as soon as November.

"We’re baffled why the DfT did not tell us that we would be disqualified or even discuss the issue – they have known about this qualification in our bid on pensions for months," he said in a blog post earlier this week.

"We can’t accept a risk we can’t manage – this would have been reckless. This is an industry-wide issue and forcing rail companies to take these risks could lead to the failure of more franchises."

City A.M. revealed that Virgin Trains is also considering taking legal action against the government over the decision.

A spokesperson for Stagecoach said: “We can confirm we have written to the Department for Transport seeking answers to the numerous legitimate questions many people have about their decision.

“We expect a prompt, full and transparent response to help restore public confidence in the integrity of the government’s procurement process, which has been badly shaken by this and other recent events.”

The prospect of legal action will be a further headache for Grayling, who was lambasted earlier this year for his decision to award a contract for supplying ferries in the event of a no-deal Brexit to a firm that had no ships.

Last month he agreed to hand out £33m to Eurotunnel to settle a legal claim with the Channel Tunnel operator, which complained that the process of awarding the no-deal ferry contracts had been "secretive".