The troubled rail franchise, which is expected to have lost £20m in the first half of the year, is suffering from falling passenger numbers.

Ministers have refused National Express’s requests for its contract with the government to be renegotiated.

The Department for Transport said that all East Coast services would continue and that tickets would be honoured.

BBC business editor Robert Peston said that National Express had tried to buy itself out of the franchise with an offer of “well over £100m”.

However, transport secretary Lord Adonis decided to reject the approach “on principle”.

Tender

National Express – which has made no secret of problems on the route – said that it expected to default on payments that it must make under the terms of its franchise.

The government said it would take over the franchise when this happened – though this may not be for some months.