State-invested firm and Hong Kong’s MTR on course to win rail contract

Chinese railway companies are on course to win bids to operate High Speed 2 trains because of chaos among British bidders.

The Times newspaper reported that State-invested Chinese operator Guangshen Railway Co and MTR, that runs Hong Kong’s rail network, are favorites to take the contract to run the 354km-per-hour trains from a shortlist of three, which includes two British-led entries — one from a consortium involving Virgin and another led by First Group.

High Speed 2 (HS2) is a high-speed railway project in the United Kingdom, directly linking London, Birmingham, the East Midlands, Leeds and Manchester.

First Group’s chief executive resigned last month after reported losses of 326 million pounds ($427 million) and Virgin Trains handed back control of the East Coast main line to the government after overbidding for the rail franchise.

Final bids for the new West Coast Partnership that will design and run the HS2 services are due early next month. The contract is to take over the running of the West Coast main line franchise from London Euston into the late 2020s.

The winning contract will eventually take over running trains on HS2 between London and Birmingham from 2026.

The report suggests bidders are worried about the amount of capital they would be expected to put up in bonds to run HS2 while it is unclear how popular the line will be.

The government also wants the final salary pension scheme for employees on the West Coast main line to revert to the winner of the bid.

These liabilities might be difficult to bear for companies like Stagecoach, which is part of the Virgin consortium, and First Group, according to the newspaper.

Faced with delays and industrial action on UK trains, the source told The Times, “the government cannot afford to stuff this up”, adding, “unfortunately, they appear to be tendering a contract which is proving far from easy to bid for.”

Britain’s transport secretary Chris Grayling is due to make a final decision next May.

Julian Beer, deputy vice-chancellor at Birmingham City University, said, if a Chinese company does win the contract then, “it is up to the British government and British firms to make sure they feature in the supply chain and associated activities to at least gain some benefits”.

He added that the wider lesson for Britain is to learn from this and, “take a leaf out of the Chinese book and have a functioning and long-term business and industrial strategy where the government, industry and all the other stakeholders work together towards the best outcome for all involved”.

“The path of the Chinese Belt and Road Initiative for me serves as a great template for us to follow and for us to create our version post-Brexit on how we trade with the world and we should be doing so now,” Beer said.