ScotRail breaches contract after failing to pay bills on time

Train operator Abellio is in breach of its franchise agreement to run ScotRail after failing to pay its bills on time for over a year.

ScotRail has failed to pay 75% of its bills to suppliers on time.

New payment practice figures lodged with the UK Government, show that the firm only settled 25 per cent of its bills over a six-month period in the 30-day timescale, taking an average of 48 days to pay.

A total of 75 per cent of bills were not paid in time by the embattled Dutch firm between October last year and March, yet its contract with the Scottish Government to run rail services, states: “The Franchisee shall settle valid invoices from its suppliers and sub-contractors for the sums contractually due within 30 days of receipt by the Franchisee of such invoices.”

The figures also show ScotRail has consistently failed to pay its invoices on time since reporting began, putting it in violation of its franchise agreement since July 2018. It took an average of 33 days to settle invoices in the six months to December 2018, which increased to 40 days from January to March 2019, fell to 36 days between April and September, before rising again to 48 days.

The revelation of the breach comes six months after the government said it was ending its ten-year agreement with Abellio in 2022, three years early. The decision was made after years of complaints about performance and after the company failed to get a “substantial uplift” in annual subsidies from the government, who said it would not have provided value for money.

At the time an industry source told The Scotsman that ScotRail had “bigger issues with its finances than performance”.

Scottish Labour MSP, James Kelly, who uncovered the payment statistics, said that failure to pay its bills could indicate further financial troubles for Abellio.

He added: “These figures are shocking, and disappointing. The Scottish Government has stood by Abellio time and time again, even moving the goal posts to avoid violations in the past.

“Issues with ScotRail usually revolve around inconsistent and unreliable services for passengers, but this just shows that it cannot even be relied upon when it comes to paying its own bills. The government cannot turn a blind eye to this blatant violation of the franchise agreement and must address this issue with ScotRail urgently so that this number does not continue to grow.”

Liberal Democrat transport spokesperson Mike Rumbles said major firms like ScotRail had a duty to ensure suppliers were paid on time. “At times like these prompt payments to suppliers are more important than ever,” he said.

Scottish Greens transport spokesperson John Finnie agreed. “It’s simply unacceptable that ScotRail has once again breached its franchise agreement,” he said.

“Its suppliers will all be facing challenges at this difficult time and would rightly expect an organisation which receives shed loads of public cash to pay its bills on time. The continued failure of ScotRail’s management to live up to their obligations undermines the efforts of its dedicated workforce, who have gone above and beyond throughout this crisis.”

And Scottish Conservative shadow economy secretary Maurice Golden said: “Organisations like ScotRail are supposed to set an example when it comes to this kind of thing. Failing to pay suppliers on time is unacceptable any time. But during a crisis like this it’s even worse, especially as many of these businesses will be on shaky ground as it is.”

Currently ScotRail has an emergency agreement, with additional financial support from the Scottish Government, due to the Covid-19 pandemic to ensure essential services for key workers, however The Scotsman understands that penalties for breaching the franchise terms can still be applied.

A Transport Scotland spokesperson said: “We expect ScotRail to meet their responsibilities in terms of paying suppliers within the timescales set out in the franchise. We regularly review all aspects of the franchise delivery, holding ScotRail to account where they fall below acceptable standards.”

And a spokesperson for ScotRail said that it had “varying payment terms with suppliers” which resulted in differing payment dates. He added: “Invoices will only be paid when suppliers follow the correct payment process. Non-compliance with the process – including sending incorrect information or a failure to properly complete paperwork – may result in a payment delay.

“ScotRail is committed to making payments within agreed contractual timescales provided suppliers comply with the correct process. We prioritise our efforts on paying small to medium size companies in the first instance, which may be at higher risk of financial hardship.”

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