Transport giant defends £500m shareholder payout after criticism

First Group announced the payout two months after it signed National Rail Contracts (NRC) for two of its subsidiary companies TransPennine Express and South Western Railway, following the Government’s decision to overhaul the rail system and scrap the old franchising model.

In a statement, the company said there is “no revenue risk and very limited cost risk” under the new system which “works better for passengers and taxpayers, while generating more resilient and consistent returns for shareholders”.

The National Union of Rail, Maritime and Transport Workers (RMT) has criticised the shareholder payout and says the contracts are “ushering in a new era of risk-free profiteering” at the expense of taxpayers who have been hit hard during the pandemic.

However, First Group said it decided to make a £365m payout after it sold American subsidiaries FirstStudent and FirstTransit for £3.3bn, but increased it to £500m after it signed the NRCs and gained more clarity about the future of its UK rail operations.

“The proceeds from the sale of our North American businesses enable us to address longstanding and significant liabilities,” said a First Group spokesman.

“We are paying a substantial amount into our pension schemes and have paid back our CCFF (Covid Corporate Financing Facility) pandemic support loan from the Government, as well as returning value to shareholders, while also ensuring our ongoing business has the financial strength and flexibility for the future.

“Our employees will benefit from our renewed focus on bus and rail services in the UK. This includes, for example, the creation of green jobs as the company delivers on our net zero carbon commitments and through playing a key role in helping the country ‘build back better’, not least in left behind towns and cities where we provide critical transport networks.”