The competition to run trains on the West Coast Main Line has been cancelled following the discovery of significant technical flaws in the way the franchise process was conducted.

Transport Secretary Patrick McLoughlin says the decision means the Department for Transport (DfT) will no longer be awarding a franchise contract to FirstGroup in December.

FirstGroup was due to take over the running of the London to Scotland line after being awarded the contract by the DfT in August, but Virgin Rail, which currently runs the service, launched a High Court challenge against the decision.

The DfT said it would no longer contest the judicial review sought by Sir Richard Branson's company.

Mr McLoughlin has also ordered two independent reviews into the competition process.

The Government said it was "resolving urgently" the future arrangements for operation of the West Coast service, which was due to be handed over to FirstGroup on December 9.

Mr McLoughlin said: "I have had to cancel the competition for the running of the West Coast franchise because of deeply regrettable and completely unacceptable mistakes made by my department in the way it managed the process."

FirstGroup said that until it was notified by the DfT on Tuesday, it had no indication there were any problems with the franchise process.

The firm said in a statement: "We are extremely disappointed to learn this news and await the outcome of the DfT's inquiries.

"The DfT has made it clear to us that we are in no way at fault, having followed the due process correctly."

Writing on his blog on the Virgin website, Sir Richard welcomed the decision and said he was always convinced the Government's competition process was flawed.