The Virgin East Coast train line could be renationalised in a matter of months, the Transport Secretary announced yesterday.

Chris Grayling revealed last month that the franchise – run jointly by Stagecoach and Sir Richard Branson’s Virgin Group – was running out of money and likely to break up before 2020.

But yesterday he told MPs that the situation had become ‘much more urgent’ after the operators breached a ‘key financial covenant’.

He said: ‘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.’

The Virgin East Coast train line could be renationalised in a matter of months, the Transport Secretary announced yesterday

Delivering an urgent statement in the Commons, he said he has already asked officials to conduct a ‘full appraisal’ of the options to ensure the trains continue running as normal.

Stagecoach – which owns 90 per cent of the franchise – and Virgin could be awarded it on a short-term ‘not for profit’ basis, or it will be ‘directly operated’ by the Department of Transport.

Chris Grayling revealed last month that the franchise – run jointly by Stagecoach and Sir Richard Branson’s Virgin Group – was running out of money and likely to break up before 2020

If this happens it would be the third time the line has been renationalised in eleven years. It last happened in 2009 when National Express defaulted on its payments, before Virgin and Stagecoach took over in 2015.

They won the contract after promising to pay £3.3billion premiums. But they have struggled to meet the repayments as they overestimated how many passengers would use the service.

Shadow transport secretary Andy McDonald attacked the ‘failed franchise system’.

But Mr Grayling hit back at Labour for failing to cost its manifesto proposals to re-nationalise Britain’s railways. He added: ‘We have done this in this country before – it was called British Rail – and it became a national laughing stock.’

Mr Grayling also confirmed the Government intends to give a ‘direct award’ to Virgin Trains to continue to run the West Coast main line until at least March 2019, meaning no other operator is allowed to bid.