Financial News

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The collapse of Britain's most expensive rail franchise has triggered fears of major setbacks to transport expansion and upgrade plans.

A series of rail projects may be put on hold or scrapped as a result of National Express handing its £1.4bn London-to-Scotland rail franchise back to the Government.

The firm's refusal to continue funding the loss-making East Coast Main Line beyond the next few months was described by Transport Secretary Lord Adonis as "regrettable and disappointing".

It is also a huge blow to the Department for Transport's finances, with the DfT expected to have to accept a far lower offer for the franchise when it is put out to tender.

Lord Adonis said operations would be taken over by the publicly-owned East Coast Main Line Company with "no disruption of services" but admitted that reduced income could force the Government to revise other plans.

There is doubt over whether the Government will be able to press ahead with plans to expand capacity on Thameslink and replace ageing intercity trains.

In addition, the electrification of the Great Western Main Line and Midland Mail Line may be put on hold.

But the Government has insisted its £16bn Crossrail project linking Heathrow Airport to Canary Wharf and Essex remains on track.

The doubts come as a leaked document revealed a potential £29bn transport budget shortfall.

The transport industry memo, seen by the Guardian newspaper, warned of "looming spending cuts" on road and rail plans which could lead to schemes being delayed, downsized or scrapped.

Lord Adonis said the Government planned to tender for a new East Coast franchise operator "from the end of 2010".

He also warned there might be grounds to terminate the two other National Express rail franchises - East Anglia and the London to Tilbury and Southend operation c2c.