The rail operator that had originally been awarded the contract to operate the West Coast Main Line from the end of the year has been told that this will no longer be the case. FirstGroup will not be allowed to run the service after significant flaws were discovered in the bidding process. Shortly after the contract was awarded to FirstGroup in August Richard Branson’s Virgin Trains said it would be launching a legal appeal against the decision.

The new transport secretary Patrick McLaughlin has since conducted his own investigation into the tender process and found there were flaws which he described as completely unacceptable.

The competition to run the West Coast service which links London to Scotland has now been cancelled and the Department for Transport has also put three other franchise bids on hold. Mr McLaughlin said he was investigating why the West Coast bid had been allowed to go wrong adding that staff could be suspended.

The decision has been supported by Mr Branson who said it proved that the misgivings of Virgin Trains over FirstGroup’s £6 million bid for the contract were correct. Maria Eagle, Labour’s transport minister, said the fiasco over the West Coast franchise was yet another illustration of the incompetence of the Coalition government.

The other franchise bids to have been suspended are the Essex Thameside, Great Western and Thameslink services. Independent reviews into the process of awarding rail franchises will be published before the end of the year, according to Mr McLaughlin.