SIR Richard Branson has defended the Government's early termination of the East Coast rail franchise.

Transport Secretary Chris Grayling has come under fire after announcing a new East Coast Partnership will take on responsibility for both intercity trains and track operations on the route in 2020.

Virgin Trains East Coast, a partnership between Stagecoach and Sir Richard’s Virgin, had agreed to pay the Government £3.3bn to run the service over eight years until 2023.

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However, Sir Richard said the venture, which is due to use rolling stock made at Hitachi Rail Europe’s Newton Aycliffe factory in the coming months, had been hit by delays to promised rail improvements.

He said: “(The franchise bid) was based on a number of key assumptions and a promise of a huge upgrade of the infrastructure by Network Rail that would have improved the reliability of the track and allowed us to run more trains and carry many more passengers than we do today.

“The considerable delays to this upgrade, to new trains, as well as poor track reliability, will cost us significant lost revenue.”

Sir Richard added Virgin and Stagecoach have lost "significant amounts of money - well over £100m in total” on the franchise.

"We could swallow those losses and simply walk away from the franchise as others have done before," he added.

However, he said it “would be wrong” to stop providing East Coast services, as it would “bring an abrupt halt to the investment and improvements” on the line.

He added: "The current system can certainly be improved, and we want to continue to work with the Government and Network Rail to bring about improvements for the benefits of our passengers.

"I hope and believe the East Coast Partnership is a step in that direction."

National Express pulled out of the franchise for financial reasons in 2009 and the route was run by the Department for Transport for six years up to 2015.