Under the terms of the contract, free WiFi services will be rolled out, with an emphasis on the franchisee's long distance routes, and additional coaches will be added to sleeper services to and from Cornwall during seasonal peaks after local funding was secured.

First Group's contract was due to expire in March 2013, but following the failure of the bidding process for a new InterCity West Coast (ICWC) franchise in October 2012, and subsequent suspension of the process, the operator was awarded a 28-week extension to October.

Under the revised franchising schedule agreed following a review of the process by former Eurostar chairman Mr Richard Brown in the aftermath of the ICWC fiasco, a new 7-10 year Great Western franchise will be awarded following an open competition in July 2016. The DfT will negotiate a further short-term contract with First Group to cover the interim period before the long-term contract is let, which due to EU tendering laws cannot be awarded now.

This is the third direct franchising contract that the DfT has awarded; Virgin Trains is continuing to operate the ICWC after being awarded an extension in December 2012, while c2c has retained the Essex Thameside franchise following an agreement reached in May. Negotiations are said to be taking place with First about extending its contract to operate the Capital Connect franchise, while the DfT issued invitations for tender for the Essex Thameside and combined Southern, Thameslink and Great Northern franchises in September.

"This agreement provides further proof that the government's new franchising schedule is on track," transport secretary Mr Patrick McLoughlin says.