Sir Richard Branson has a point: we’re off the rails

| September 1, 2012 | 0 Comments

By
Ruth Sunderland

15:56 EST, 31 August 2012


|

02:47 EST, 1 September 2012

Sir Richard Branson could learn a thing or two about the art of losing graciously from the athletes at the Paralympic and Olympic games, who have swallowed their disappointments in good heart.

His display of petulance over losing his Virgin Rail’s West Coast franchise to FirstGroup was vintage Branson.

Sandwiched between blog posts about helping a green turtle on Necker Island that got stuck while laying 150 eggs and Kira the dog swimming with dolphins, Branson inveighed against the ‘insanity’ of awarding the franchise to his rival, and announced the start of court proceedings.

Sir Richard Branson stands beside a Virgin train

Going off the rails: Sir Richard’s display of petulance over losing his Virgin Rail’s West Coast franchise to FirstGroup was vintage Branson

Branson had hoped to delay the
decision to strip him of  the franchise and had offered to run it for
‘free’ – or rather on a not-for-profit basis, in the time it took for it
to be scrutinised by Parliament or in an external review.

He is, of course, a champion feuder, and his histrionics should be taken with a pinch of salt.

Public
rows are a weapon in the Virgin marketing armoury and all part and
parcel of Branson’s somewhat incongruous image as a David taking on the
corporate Goliaths.

Branson
is very good at the strategic tantrum. He’s so good that his cause is
being supported by Labour, whose Maria Eagle, the shadow transport
secretary, has been urging her opposite number Justine Greening to delay
signing off on the franchise and echoing Branson’s concerns that
FirstGroup may have bitten off more than it can chew.

The
irony of a supposedly left-wing opposition siding with a billionaire as
he pours forth his grievances from his private paradise island is
somehow lost.

The Virgin
tycoon is seeking a judicial review on the basis that the Department
for Transport did not take full account of the risks of FirstGroup’s
bid.

It assumes higher
growth in revenues than his own, which are likely to be hard to achieve
given that Virgin has already squeezed out a lot of improvement and the
economy is in a bad way.

But
FirstGroup and some City analysts have pointed out that Virgin has made
a high margin on the franchise. Tim O’Toole, the FirstGroup boss, is of
the view that Branson is simply sore that another large cheque will not
now be making its way in the direction of his Necker haven.

Having
acknowledged all that, there are problems with the way government
contracts are awarded, in their lack of transparency and sometimes
perverse outcomes.

A
case in point is the infamous decision by the government in the summer
of 2011 to hand a £3bn contract for new rolling stock for the Thameslink
line to German manufacturer Siemens. This was at the expense of
Britain’s last domestically-focused train manufacturer, the
Canadian-owned but Derby-based Bombardier.

Another
was the cancellation of an £80m government loan to Sheffield
Forgemasters, a firm that was planning to create 180 jobs as it expanded
its activities making parts for reactors. Since new nuclear is a key
plank in the Coalition’s energy strategy, the move seemed unaccountable.

Branson’s
courtroom dramas have in the past led to interesting revelations: about
BA’s ‘dirty tricks’ battle with his airline and about the operations of
GTech, the US gaming group that held a chunky stake in Camelot.

The
railways could play a major role in economic recovery, but the record
of successive governments in the running of them has been pretty
lamentable.

The row over
the West Coast line has inevitably stirred up those who advocate a
return to state ownership, who  forget just how dire the old British
Rail was. They also  forget the Railtrack fiasco, when the then
transport secretary Stephen Byers so badly misjudged the
renationalisation of the tracks.

Another
irony is that the UK’s still over-liberal attitude to overseas
takeovers has led to the encroachment of foreign state-owned companies
on to Britain’s train network, such as Deutsche Bahn, which took over
the train and bus company Arriva in 2010.

The
whole issue of how contracts are bestowed and of overseas involvement
will  flare up again in the division of the spoils of the HS2 high-speed
link between London and Birmingham, and eventually the North.

On
past form, it will be a magnet for foreign players, and the risk is
that subsidies provided by British taxpayers will make their own
high-speed journey into the coffers of overseas firms and governments.

However
self-interested the motivation, if Branson’s day  in court helps to
shine a light on the wider issues around  our railways, he will have
performed a public service.

Here’s what other readers have said. Why not add your thoughts,
or debate this issue live on our message boards.

The comments below have not been moderated.

Actually Alex, he didn’t buy Northern Rock on the cheap, the government failed in its duty to sell it at a reasonable price. Branson is a business man and paid what he thought it was worth.

Richard is a hypocrite because when he bought Northern Rock on the cheap as the expense of the taxpayers whom the Labour used to bail them out and did he complain that it expensive when he bought it and will he pays the taxpayers back the profits when he makes money from N R, I think not. He becomes more greedy as he grow older.

The views expressed in the contents above are those of our users and do not necessarily reflect the views of MailOnline.

Leave a Reply

You must be logged in to post a comment.

Get Adobe Flash player