Sir Richard Branson’s UK rail operator, Virgin Rail, has lost its bid to continue running the West Coast mainline route, it was announced today.

The contract has been handed to rival operator FirstGroup plc (LSE:FGP), which according to Sir Richard had outbid Virgin by GBP750m.

Unions and rail campaigners have criticised the decision, arguing that it is likely to lead to the loss of hundreds of jobs, poorer services and huge increases in fares.

“The Government is always seduced by the big buck, but any savings on the franchise will have to come by cutting staffing or higher fares,” commented Simon Weller, national officer of the train drivers’ union Aslef.

FirstGroup will operate the new InterCity West Coast rail franchise until 2026 and claims that it will offer substantial improvements in the quality and frequency of services, attracting far greater numbers of passengers.

In a statement Sir Richard described Virgin’s loss of the franchise as “extremely disappointing” and praised the staff who have worked hard to transform the service over the last 15 years. He said that cuts in quality and considerable fare rises would have been required if Virgin’s bid was any higher, pointing out that bankruptcy had hit GNER and National Express who had “overbid” for the East Coast mainline franchise.

The Virgin boss added: “Sadly, the Government has chosen to take that risk with FirstGroup and we only hope they will continue to drive dramatic improvements on this line for years to come without letting everybody down.”

With regard to the possibility of Virgin bidding again for a rail franchise, Sir Richard suggested that he was prepared to walk away from the rail industry, stating that future bids under the current system were “extremely unlikely”.

FirstGroup is expected to take over the West Coast line on 9 December and the franchise runs for 13 years and four months.