Train firms' finances hit by downturn

The director-general of rail at the Department for Transport Mike Mitchell said a "traffic light" system monitoring their financial health had shown a "red light" for "a small number of companies". Mr Mitchell told the Commons public accounts committee the economic downturn was "having an effect" but revenues across the industry were "holding up reasonably well".

This week rail bosses met Transport Secretary Geoff Hoon to plead for permission to cut services to save costs in the face of falling revenues.

But Mr Mitchell said he expected passenger numbers to carry on growing this year. Last year a record number of people travelled by train, but there was a fall in the rate of growth to less than 5 per cent, down from a 7.8 per cent increase in the previous year.

The Government has attempted to use the growth in passenger numbers to make the railways less reliant on public subsidy. National Express East Coast, which runs long-distance services from Kings Cross to the North, and London's biggest commuter franchise South West Trains are both due to pay more than £1billion over the next decade to the Treasury. There is no suggestion either is in financial difficulty.

But the Association of Train Operating Companies warned in a memo of a "potentially devastating" effect from the downturn.