By Rosalba O'Brien
LONDON (Reuters) - Britain has announced a shake-up in the way it awards rail franchises, battling to restore confidence in a privatised network which has been dogged by financial problems at rail companies and costly errors in the bidding process.
The government said on Tuesday it would implement the recommendations of an independent review set up after mistakes in the way bids were assessed forced it to tear up the award of the West Coast mainline franchise last year.
The recommendations include staggering the award of franchises and creating a new advisory panel.
Britain's railways have faced a string of problems since they were privatised in the 1990s, including fatal crashes that led to expensive and disruptive network upgrades, as well as financial problems at rail companies which led the government to bring the East Coast mainline back into public hands in 2009.
The Department of Transport said on Tuesday it would immediately start a competition to return the East Coast service to the private sector, and gave a schedule for other franchises, with the West Coast line up for grabs from April 2017.
"The new programme will provide long-term certainty to the market and support the delivery of the government's 9.4 billion pounds rail investment strategy for 2014-2019," said Transport Secretary Patrick McLoughlin.
Virgin Trains, which was to lose the West Coast service before flaws in the award process led the government to ask it to stay on, gave a cautious welcome to the new proposals.
"It seems a lot of things we were arguing for have come to pass," said a spokesman. "It's clear they've learnt their lessons. Let's hope we can move on."
However trade unions, which oppose the privatisation, said the East Coast line had "flourished" under state control.
"This is privatisation for privatisation's sake, as ministers steadfastly ignore what is best for the rail industry and the people who work on it and use it," said Trades Union Congress general secretary Frances O'Grady.
Virgin Trains, a venture between businessman Richard Branson's Virgin Group and Stagecoach, was asked last year to continue running the West Coast service until November 2014.
Its spokesman said the new timetable for the franchise meant its contract was effectively being extended, although the company would need to sit down and negotiate with the Department of Transport as it "would prefer an incentivised contract."
He said Virgin also expected to bid for the East Coast service, which runs the London to Edinburgh route and is now slated to return to the private sector from February 2015.
An eight-year East Coast contract was won by National Express in 2007 after the demise of the original holder, GNER. But the service was renationalised after the company said funds set aside to cover losses on the line would run out.
The new staggered timetable means extensions on existing contracts will be needed to get expiring franchises into place.
This should benefit current operators Go-Ahead, FirstGroup, Stagecoach and National Express, said analysts at Jefferies.
"While that should be seen as a small positive for all, it may be most so for FirstGroup, which should secure some needed cash flows for longer out of this," they said.
FirstGroup - which runs Capital Connect, Great Western and TransPennine Express - and Stagecoach both welcomed the timetable publication in separate statements.
FirstGroup was awarded the West Coast franchise - which links London to Glasgow - last year, before the government cancelled its decision at a cost of around 40 million pounds to the taxpayer.
(Editing by Tom Pfeiffer and Mark Potter)