RAIL services on the Scotland-to-London East Coast Main Line are to be brought back under public control following the termination of the franchise agreement with Virgin Trains East Coast (VTEC), Stagecoach Group has said.

The Perth-based firm, which owns 90 per cent of VTEC, said it was "surprised and disappointed" that the Westminster Government chose not to award it a new deal to continue running services on the London to Edinburgh route.

It will now be run by the Department for Transport (DfT) through an operator of last resort (OLR).

Stagecoach pledged to "work constructively with the officials and the OLR in the weeks ahead to ensure a “professional transfer to the new arrangements".

The change will see the route rebranded as the London and North Eastern Railway (LNER), Transport Secretary Chris Grayling told the Commons.

He said Stagecoach and Virgin would not be prevented from bidding for rail franchises and that "there is no suggestion of either malpractice or malicious intent in what has happened".

Grayling said both firms have paid a "high financial and reputational price" from their involvement in the East Coast Main Line.

But Transport committee chair Lilian Greenwood MP turned her focus to the Department for Transport, saying: “Three times in less than a decade, the government has been forced to intervene in the East Coast rail franchise. It is a very sorry tale.

“Let the Secretary of State be in no doubt – my committee will be looking closely that what has happened, the choices he made in the run up to this decision and his plans for a new partnership. It is important that the Secretary of State is held to account not just for his policies but his implementation of them.

“The Secretary of State promised that he would publish a full appraisal of the options assessed. I look forward to seeing this as soon as possible and we will look at the Department’s analysis very carefully. I am sure the National Audit Office will want to build on the work it has done in this area to ensure this deal represent the best value to the tax-payer.

“It is vital that the Department reassures passengers that the arrangements it has put in place today will ensure service levels are maintained.”

The news comes three months after Transport Secretary Chris Grayling told the Commons the big-money franchise would only be able to continue in its current form for a "very small number of months" as Stagecoach had "got its numbers wrong" and "overbid".

VTEC was awarded the East Coast Main Line franchise for eight years following a bidding process in 2014.

But Stagecoach reported losses on the line and in November last year Grayling announced that the franchise would be terminated in 2020 and become a public-private railway.

The decision to end the £3.3 billion contract this year has been described as a "bailout" by Labour and trade unions.

In February, Grayling insisted "there is no question of anyone receiving a bailout", adding: "Stagecoach will be held to all of its contractual obligations in full."

VTEC is the third private operator to fail to complete the full length of a contract to run services on the East Coast route.

Rival firm GNER was stripped of the route in 2007 after its parent company suffered financial difficulties, while National Express withdrew in 2009.

Services had been run by the DfT for six years up to VTEC taking over in 2015.