UK: Serious errors were made by Govia’s Southeastern franchisee London & South Eastern Railway Ltd in its engagement with the Department for Transport over several years, a review commissioned by the chairs of shareholders Go-Ahead Group and Keolis UK has found.
The Operator of Last Resort took over Southeastern services when LSER’s contract expired on October 17. DfT had decided not to award a National Rail Contract to LSER from this date following discussions regarding the calculation of profit share payable by LSER under the franchise agreements and the treatment of certain overpayments which had been made by DfT to LSER.
Following the review by legal and accounting advisers, on December 9 Go-Ahead said that by failing to notify DfT of certain overpayments or monies due to DfT, LSER had breached contractual obligations of good faith contained in the franchise agreements.
Go-Ahead said the behaviours identified by the review ‘do not reflect the values and standards of conduct that the group expects of its colleagues’, and whilst the board is of the view that the group has good corporate governance arrangements in place, it will ‘take this opportunity to further enhance certain aspects to better safeguard and assure the compliance obligations of complex long term rail contracts’.
Go-Ahead has apologised to DfT, which is is considering its options for enforcement action, including a financial penalty under the Railways Act 1993. Go-Ahead said ‘in the absence of specific precedent or relevant guidance, it is difficult to estimate precisely the likely quantum of any penalty’, but it is considering with Deloitte the inclusion of a provision in its FY21 financial statements.
Because of the complex nature of the report, Go-Ahead and Deloitte have concluded that more time is required to consider the implications for the FY21 results. It will not be possible to complete the audit before January 3 2022, the latest date permitted for publication of the FY21 results under the Financial Conduct Authority’s Disclosure Guidance & Transparency Rules. After consultation with the FCA, the group anticipates that trading in its shares will be temporarily suspended from January 4 until publication of the results, which is expected to be before the end of January.
Responding to the news, the RMT and TSSA trade unions called on DfT to remove the separate Govia Thameslink Railway franchise held by the same owning group.
RMT General Secretary Mick Lynch said ‘this whole affair stinks’, and called for ‘a wider, truly independent review, involving the National Audit and Serious Fraud offices into historic fraud in the rotten privatised rail system’, while Manuel Cortes of the TSSA said ’Go-Ahead’s admission that they held onto £25m of taxpayers’ money should be the final death blow for privatisation.’
