SIR Brian Souter has claimed the UK Government has lost the “best railway operator in Britain” as Stagecoach prepares to exit the rail franchise industry.

The transport giant held its annual meeting in Perth yesterday following a troubled few months which has seen it barred from bidding from three major rail franchises, having been told by the Department of Transport (Dft) in April that its proposals did not make sufficient provision for a major railway pension scheme.

Stagecoach, which is suing the UK Government over the disqualification, will effectively exit the rail franchise industry in December.

READ MORE: Transport giant Stagecoach signals end to UK rail bids

Addressing investors at Perth Theatre yesterday, Sir Brian said: “The department have now lost the best railway operator in Britain. We had the best customer satisfaction we had the best punctuality and we had the best industrial relations.

“A franchise system that ignores these issues in its delivery, it is fundamentally flawed.

“We should be awarding franchises to people not on the basis of filling out forms and essays about the future. They should be putting far more weight on the delivery of customer service, and the fact that we executed the best railways in Britain.”

With those comments sparking applause from the audience, Sir Brian added: “We leave the railways sad, but we leave them with our heads held high because we are proud of what we achieved.”

READ MORE: Stagecoach raises stakes in rail fight with Government

Stagecoach saw its bids for the East Midlands, West Coast Partnership and South Eastern franchises thrown out after the DfT said they did not make sufficient provision to cover liabilities on the Railway Pension Scheme.

The firm, which has been involved in UK rail since privatisation in the 1990s, believes the level of risk demanded by the Dft will lead to more franchises failing.

Sir Brian added: “I have to say from a shareholder point of view that we really feel this pension issue that we have picked up on has kind of been ignored by others.

“We’ve ended up with our railways being run by state-owned companies from all over Europe. And I have to say if Dutch taxpayers want to pick up the bill for the pension deficit for our workers then we have got to kind of welcome it.

“We are not cross-subsidising from our UK bus operations into these and taking a risk on our balance sheet. We are not prepared to that.”

READ MORE: Pay rise for Stagecoach chief as Perth firm looks beyond rail

A root and branch review of the UK rail industry was launched by the UK Government in September 2018. It was initially planned that a white paper containing Keith Williams’ recommendations would be published this autumn. But the Brexit crisis has led to fears the paper will be kicked into next year.

Stagecoach will exit UK rail franchising in December after its deal to run the West Coast ends.

Chief executive Martin Griffiths told investors the firm would consider opportunities to expand its bus operation in the UK and move into new international markets.

Responding to a question about expansion options available to the company, in light of its UK rail exit and the sale of its US bus operation earlier year, Mr Griffiths said the firm would not rule out opportunities in other countries if they fitted its strategy.

He said: “Of course, it is an interesting time in the market. It is very much on the public record that both Arriva, which is part if Deutsche Bahn, and FirstGroup are certainly exploring options for all or parts of their portfolios.

“Clearly, when you are in these markets you watch what’s happening. If at a time that can create opportunity for our company and our shareholders, we would look at that.”

Sir Brian’s comments shortly before Stagecoach was hit by a revolt from some over executive pay, with 17.54 per cent of the voted shares going against a resolution calling for approval for the directors’ remuneration report (other than the summary of the directors’ remuneration policy).

Mr Griffiths received a performance-linked bonus of £848,000 which took his overall pay to £1.8 million for the year ended April 27. But one investor asked why a bonus was paid in light of “some of the problems you have had”, and whether the criteria would change.

Ray O’Toole, who chairs the remuneration committee, said the pay policy had been approved in 2017 and the firm had exceeded its financial targets and market consensus for the year. He said Mr Griffiths did not receive a bonus last year when the company lost the East Coast franchise.

Shares closed down 2.2p at 123.3p.