The decision to award FirstGroup the West Coast Main Line rail franchise has been cancelled following the discovery of significant "flaws" in the way the bidding process was conducted.
FirstGroup was set to take over the running of the London to Scotland line from December but Virgin Rail - which currently runs the service - launched a High Court challenge against the decision.
The Department for Transport (DfT) said today they would no longer contest the judicial review sought by Sir Richard Branson's company.
Transport Secretary Patrick McLoughlin has also ordered two independent reviews into the competition process.
Evidence of significant flaws in the DfT's approach emerged while officials were gathering evidence for the High Court legal proceedings, the department said. It said the flaws stemmed from the way the level of risk in the bids was evaluated.
The DfT added that mistakes were made in the way in which inflation and passenger numbers were taken into account and how much money bidders were then asked to guarantee as a result.
FirstGroup said they were "extremely disappointed" by the DfT's decision to cancel their West Coast Main Line contract.
What cancelling the West Coast Main Line competition means:
- FirstGroup, who were due to take over the running of the West Coast Main Line in December, will no longer be awarded the franchise.
- The Department for Transport will no longer contest the judicial review sought by Sir Richard Branson's company Virgin Rail - who currently run the service.
- Transport Secretary Patrick McLoughlin has ordered two independent reviews into the competition process.
- An announcement is expected later today about the suspension of government staff while investigations are conducted.
- The Government has paused all other outstanding franchise competitions - Great Western, Essex Thameside and Thameslink.
- Officials have now been asked to examine the options for the operation of the service after December 9.