Richard Branson says he is prepared to let his illustrious company Virgin Trains disappear from the UK rail industry after more than 20 years following the news that its partner Stagecoach was disallowed from three franchise bids.

The owner of the train business says he has been left “baffled” on why the Department for Transport (DfT) did not tell the firm why it would be disqualified or even “discuss the issue”, insisting that those overseeing the process have known about the qualification in their bid on pensions for months.

Stagecoach which has a 49% stake in Virgins Trains, has been barred from bids because of not meeting pensions rules. The DfT on announcing Abellio as the East Midlands Railway franchise winner earlier said Stagecoach had "repeatedly ignored established rules".

Transport secretary Chris Grayling hailed Abellio’s ability to improve the experience for passengers over the next eight years and said the firm would deliver state-of-the-art new trains, upgraded ticketing systems and improvements to stations.

But with the Pensions Regulator calculating that the UK rail industry needs an additional £5-6bn to plug the pensions shortfall, Branson has pointed to the massive risk involved and the possibility of handing over a blank cheque.

Speaking about the issue, Branson said: “The pensions regulator has warned that more cash will be needed in the future, but no one knows how big that bill might eventually be and no responsible company could take that risk with pensions. We can’t accept a risk we can’t manage - this would have been reckless. This is an industry-wide issue and forcing rail companies to take these risks could lead to the failure of more rail franchises.”

The Virgin Trains owner added how the company had “significant concerns over the latest developments and their implications for the future of the UK rail market” and that options would need to be considered before any further decisions were made. 

He added: “I am devastated for the teams who have worked tirelessly to make Virgin Trains one of the best train companies in the UK, if not the world. Virgin Trains has led in the industry for more than 20 years and we wanted this to continue for many more years. Running the railway comes with many challenges and the West Coast Main Line was struggling when we took it over, but we were determined to turn it around. With new trains, new track and our incredible team, we have become renowned for the award-winning way we look after our customers.”

Earlier, Martin Griffiths, chief executive of Stagecoach, called for an urgent meeting with the DfT over the decision.

“We are extremely concerned at both the DfT's decision and its timing,” Griffiths said. “The department has had full knowledge of these bids for a lengthy period and we are seeking an urgent meeting to discuss our significant concerns."