The transport secretary Grant Shapps is set to announce the termination of Arriva’s Northern Rail franchise this week, according to widespread national media reports over the weekend, with the failed Northern franchise to be renationalised to ensure the service continues to operate.

The reports follow the news that the Southern Western Railway (SWR) franchise is also in danger of being taken back into public control, as SWR’s recent financial statements have indicated that the franchise is not sustainable in the long term. Poor operational performance, combined with slower revenue growth, has led to the financial performance of SWR to be significantly below expectation since the franchise commenced in August 2017.

The latest news comes as a growing number of industry bodies have raised serious doubts about whether the current franchising model is viable, with calls for major government investment in infrastructure to tackle the root causes of failing rail services. Keith Williams, who is leading an independent review into the railways, has already stated that franchising cannot continue in its current form.

The decision to renationalise Northern, which the transport secretary Grant Shapps is reportedly due to deliver by Thursday, would mean the second major franchise to be renationalised by the government in less than two years. The state-owned “operator of last resort,” which has run LNER since June 2018, would take over the running of Northern.

The Northern franchise was awarded to Arriva in 2016, but plans to improve services have foundered on the back of delays to infrastructure and a long-running dispute with unions leading to widespread strikes. Punctuality and reliability collapsed around the introduction of the May 2018 timetable and have largely failed to recover, and potential renationalisation was announced as a serious option earlier this month.

Chris Burchell, Arriva’s managing director of UK Trains, said: “We accept services on the Northern network are not yet good enough and we sincerely apologise to our customers for our role in that. Many of the issues affecting the franchise however are outside the direct control of Northern. Assumptions were given when the plan for the franchise was developed that critical infrastructure projects would be delivered to enable growth and support capacity demands. Many of these have either been delayed or cancelled. These challenges will continue to affect services irrespective of who is running them. What is needed is a new plan, and, in that analysis, we are fully in agreement with government.”

The government is also preparing contingency measures at South Western Railway, with a new short term contract or taking the franchise back into public ownership both under serious consideration to ensure that services continue to run.  

A spokesperson for SWR train operators FirstGroup/MTR said: “As we indicated in the statutory accounts for SWR released earlier this month, we continue to be in ongoing and constructive discussions with the DfT regarding potential commercial and contractual remedies for the franchise and what happens next, as we seek to ensure the right outcome for our customers, our shareholders and the government. We will be responding to the government’s request for proposal in the coming weeks.”

In a written statement to parliament, transport secretary Grant Shapps said: “Across the country a number of franchises are failing to provide the reliable services that passengers require and there are legitimate questions on whether the current franchising model is viable. Keith Williams, who is leading an independent review into the railways, has already stated that franchising cannot continue in its current form. His review will propose sector-wide reforms which aim to put passengers at the heart of the railway.”