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| Exit of Virgin Trains leaves behind a muddle over pension liabilities | Exit of Virgin Trains leaves behind a muddle over pension liabilities |
| (32 minutes later) | |
| The disappearance of Virgin Trains from the UK’s railways isn’t a cause for national mourning, however much Sir Richard Branson might wish otherwise. He had a very profitable run for a couple of decades. | The disappearance of Virgin Trains from the UK’s railways isn’t a cause for national mourning, however much Sir Richard Branson might wish otherwise. He had a very profitable run for a couple of decades. |
| Yet the tale of how Stagecoach and Virgin were disqualified from three UK franchise competitions this week continues to intrigue, not least because the rail minister, Andrew Jones, gave shockingly vague answers when questioned in the Commons on Thursday. | |
| Did the government change the rules on pension liabilities in the middle of the competition? Were operators told they would have to accept big pension risks that were previously assumed to be underwritten by the state? | Did the government change the rules on pension liabilities in the middle of the competition? Were operators told they would have to accept big pension risks that were previously assumed to be underwritten by the state? |
| Jones said the answer was no in both cases, but that prompts the question asked by the former Tory transport secretary Sir Patrick McLoughlin: if Stagecoach was always unwilling to accept the supposedly well-defined pension liabilities, why was it disqualified at the end of a lengthy process and not at the beginning? It makes no sense. | |
| The questions continue. The Department for Transport defended the award of the East Midlands franchise to Abellio on the grounds that the Dutch state-backed operator offered the “strongest” bid. The phrasing is disingenuous, at best. It fails to make clear that Abellio made the only bid deemed to meet the rules. Stagecoach was disqualified but so was the third bidder – Arriva, owned by Deutsche Bahn. It’s not much of a competition if only one runner gets to the finish line. | The questions continue. The Department for Transport defended the award of the East Midlands franchise to Abellio on the grounds that the Dutch state-backed operator offered the “strongest” bid. The phrasing is disingenuous, at best. It fails to make clear that Abellio made the only bid deemed to meet the rules. Stagecoach was disqualified but so was the third bidder – Arriva, owned by Deutsche Bahn. It’s not much of a competition if only one runner gets to the finish line. |
| At least the Commons debate provided one laugh when McLoughlin, referring to state-owned Abellio, had a jab at his successor, Chris Grayling: “Can I congratulate the government on widening state ownership of the railways, albeit other states?” Ho, ho. | At least the Commons debate provided one laugh when McLoughlin, referring to state-owned Abellio, had a jab at his successor, Chris Grayling: “Can I congratulate the government on widening state ownership of the railways, albeit other states?” Ho, ho. |
| But there’s also a serious point there. The rail franchising system has been creaking for years. If we’ve now reached the point where only foreign state-backed companies wish to play, that’s serious, especially if Deutsche Bahn is also among the non-runners. Value for money for taxpayers, which was supposed to be the whole point of the privatised system, will suffer. | But there’s also a serious point there. The rail franchising system has been creaking for years. If we’ve now reached the point where only foreign state-backed companies wish to play, that’s serious, especially if Deutsche Bahn is also among the non-runners. Value for money for taxpayers, which was supposed to be the whole point of the privatised system, will suffer. |
| And, if the deep cause is operators’ fear that £6bn worth of pension liabilities could be redirected in their direction, that’s incompetence. Clarity should be easy. The details of the government’s “risk-sharing” arrangements for pensions cannot be a mystery. Grayling needs to do better than his rail minister. We won’t weep for Branson, but we do expect coherent answers in an affair that clearly has a long way to run. | |
| Time for Sir Phil to get his chequebook out again? | Time for Sir Phil to get his chequebook out again? |
| Congratulations to Jamie Drummond Smith and Peter Bloxham, the duo chosen by Sir Philip Green to advise him on the restructuring of his wife’s Arcadia empire. It’ll be a thrill-filled adventure, as it always is with Sir Phil, but also mighty complex. Arcadia is attempting to cajole landlords into accepting lower rents while also seeking a fresh deal with the Pensions Regulator. | Congratulations to Jamie Drummond Smith and Peter Bloxham, the duo chosen by Sir Philip Green to advise him on the restructuring of his wife’s Arcadia empire. It’ll be a thrill-filled adventure, as it always is with Sir Phil, but also mighty complex. Arcadia is attempting to cajole landlords into accepting lower rents while also seeking a fresh deal with the Pensions Regulator. |
| One piece of advice to the Greens ought to be straightforward: whatever happens, Arcadia’s pension fund, sporting a deficit of about £530m on one measure, has to end up in a substantially improved position. | |
| It could hardly be otherwise. At BHS, Green eventually accepted he had to write a cheque for £363m to plug the pensions hole – and that was at a business he had sold the year before. At Arcadia, the Greens are the current owners, and indeed have just taken ownership of the outstanding 25% slice of Topshop. There can be no argument about where responsibility lies. | It could hardly be otherwise. At BHS, Green eventually accepted he had to write a cheque for £363m to plug the pensions hole – and that was at a business he had sold the year before. At Arcadia, the Greens are the current owners, and indeed have just taken ownership of the outstanding 25% slice of Topshop. There can be no argument about where responsibility lies. |
| Sports Direct buyback might be one of Ashley’s few safe bets | Sports Direct buyback might be one of Ashley’s few safe bets |
| If he wasn’t so obviously exploding with rage, one would think it was another of Mike Ashley’s jokes. As Sports Direct launched a modest £15m share buyback programme, the founder said such disciplined use of cash would benefit shareholders “whose support, including during the Debenhams refinancing process, we continue to appreciate”. | If he wasn’t so obviously exploding with rage, one would think it was another of Mike Ashley’s jokes. As Sports Direct launched a modest £15m share buyback programme, the founder said such disciplined use of cash would benefit shareholders “whose support, including during the Debenhams refinancing process, we continue to appreciate”. |
| Naturally, Ashley declared his approach to be “in complete contrast to the actions of the board of Debenhams, past and present”. The Debs mob ignored the wishes of their investors and “completely destroyed shareholder value”. | Naturally, Ashley declared his approach to be “in complete contrast to the actions of the board of Debenhams, past and present”. The Debs mob ignored the wishes of their investors and “completely destroyed shareholder value”. |
| Come on, Ashley is in no position to preach about value destruction. Sports Direct blew £150m on its Debs adventure, part of an ill-defined and losing policy of making “strategic investments” that has cost the thick end of £500m over the years. | |
| Yes, damning the Debs board is perfectly fair since the directors seemed to glimpse mortality far too late, as mentioned here earlier this week. But, if Ashley really wanted to express gratitude to his minority investors, he’d pledge never to buy a share on their behalf again. | Yes, damning the Debs board is perfectly fair since the directors seemed to glimpse mortality far too late, as mentioned here earlier this week. But, if Ashley really wanted to express gratitude to his minority investors, he’d pledge never to buy a share on their behalf again. |
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