STAGECOACH will lose the East Coast Mainline rail franchise earlier than expected after the Government said the operator had "got its numbers wrong".

Transport Secretary Chris Grayling said Stagecoach would only continue running the London to Edinburgh line for "a small number of months".

The contract with Virgin, originally due to end in 2023, has already been cut short once.

Mr Grayling told the House of Commons: "It is now clear that this franchise will only be able to continue in its current form for a matter of a very small number of months and no more.

"It's important to be clear with the House, this will not impact on the railway's day-to-day operations. The business will continue to operate as usual with no impact on services or staff on the East Coast.

"But it does mean I will need to - in the very near future - end the contract and put in place a successor arrangement to operate this railway.

"Given the imminent financial pressure the existing franchise is under, I am taking action now to protect passengers who depend on these train services and ensure continued value for money for taxpayers.

"Contrary to widespread speculation, no deal has been done and I have not yet made a decision on the successor operator to run the East Coast railway until the long-term plans for the integration of track and train can begin in 2020.

"There is no question of anyone receiving a bailout. Stagecoach will be held to all of its contractual obligations in full.

"To anyone who thinks that the nearly £200m that Stagecoach will lose is insignificant, let me put it into some context.

"The combined profit of every single train operator in the country was only £271m last year.

"The loss equates to over 20 per cent of Stagecoach's total market value. So it is a significant amount of money by any measure, and it should also act as a stark warning to any company tempted to over-bid in future.

"Moreover, the franchising system has been adjusted to further deter over optimism when bidding.

"The priority now is to ensure the continued smooth running of the East Coast franchise for its passengers.

"I have therefore asked my officials to conduct a full appraisal of the options available to the Government to ensure continuity of service until we implement the East Coast Partnership on the route from 2020."

Mick Cash, leader of the Rail, Maritime and Transport union, said: "This shameful fiasco on one of Britain's main rail routes needs to end and it needs to end now.

"RMT warned that taking the East Coast lines out of the hands of the successful public sector operation and handing them back to the private speculators and spivs was a disaster in the making and we have been proved right.

"East Coast should be renationalised with immediate effect and the scale of the scandal unveiled today should mark the point at which the whole rotten business of rail privatisation in Britain was called to a halt.

"RMT is demanding immediate assurances that the thousands of rail workers caught in the crossfire of this chaos will have their jobs and working conditions fully protected and underwritten.

"Chris Grayling and the Tory Government have turned transport in Britain, the nation that gave the railways to the world, into a global laughing stock.

"He is a specialist in failure of the highest order and should resign."

Mr Grayling also announced that Stagecoach and its partner Virgin would operate the West Coast mainline franchise from April 1 next year to potentially March 31 2020, which led to another furious response from critics.

Shadow transport secretary and Middlesbrough MP Andy McDonald said: "That Chris Grayling has awarded a profitable contract to Virgin and Stagecoach on the West Coast while simultaneously confirming the same companies have collapsed on the East Coast shows Government policy is in chaos.

"This is yet another Tory handout to private shareholders at the public's expense.

"Failing train companies should not be awarded future contracts, but this Government is rewarding them for failure by extending their lucrative deal.

"The Transport Secretary's failure to stand up to Virgin and Stagecoach is a disgrace. He's supposed to protect taxpayers' interests, not sacrifice them to private shareholders.

"The system is broken which is why Labour will act in the public interest by taking our railways back into public ownership."

Labour’s former transport secretary Lord Adonis said the Transport Secretary's actions were "costing the taxpayer very dearly".

He told the House of Lords Mr Grayling was "undertaking another unjustified bailout of Virgin and Stagecoach at the expense of taxpayers".

Virgin had been awarded the new West Coast franchise "without any competition whatsoever" and Stagecoach was being allowed to bid for further franchises "despite walking away from the East Coast Mainline".

Lord Adonis said: "The reason for these disgraceful bailouts we've been seeing from Mr Grayling is because he simply is not prepared to contemplate putting his duty above ideology and substituting for failing private companies a state company.

"He wants to make a whole set of cheap points about private good and public bad, which demean his office and are costing the taxpayer very dearly."