Virgin Rail is to receive about �100m of taxpayers' cash after a dispute over delays in modernising Europe's busiest main line.

The train operator, majority owned by Sir Richard Branson's Virgin group, will receive the money in return for dropping threats of legal action over upgrade hold-ups on the route, the West Coast main line between London and Glasgow.

Brian Souter: "Delighted" by cash

The delays to the track and signal improvements mean that Virgin's new fleet of tilting trains, capable of 140mph, will after their launch on Tuesday be limited to a maximum speed of 110mph.

This has left Virgin unable to hit financial targets set when it ordered the trains, part of a �2bn investment programme, and have delayed plans to cut to less than four hours the journey time between Glasgow and London.

"As a consequence of the failure of delivery on outputs from the upgrade, Virgin are faced with some short-term difficulties in their businesses," Nick Newton, chief operations officer at the Strategic Rail Authority, said.

"Therefore we have stepped in to stabilise the businesses whilst these major issues are resolved."

'Pragmatic approach'

The delays to the line upgrade have been blamed on Railtrack, the rail infrastructure firm forced by the government into administration last year.

But, with control of track and signals handed over to state-backed Network Rail, the SRA said it had taken a "pragmatic approach" over responsibility for the delays.

Mr Newton said: "We need to maintain the prospect of the output from the Virgin investment."

There was a need to look after "the overall interests of the passenger and taxpayer".

An industry insider told the BBC News Online that Virgin had been pressing for compensation for more than �250m, in a case that could have taken three years to settle.

"With the situation regarding Railtrack and Network Rail now, you can't imagine the private sector forking up for that," the insider said.

"And do you really want Network Rail to begin operations with this legal battle hanging around its neck?"

Mixed response

Brian Souter, boss at travel firm Stagecoach which owns 49% of Virgin, said the cash ensured "the ongoing commercial viability" of two franchises.

Higher speeds, quicker journeys

London-Liverpool: 1 hour 50 minutes London-Manchester: 1 hour 50 minutes London-Holyhead: 3 hours 25 minutes London-Glasgow: 3 hour 55 minutes London-Edinburgh: 4 hours Data: Virgin Rail, assuming West Coast main line update

"I am delighted that the SRA has acted to ensure that passengers do not suffer unduly," he added.

But the move little cheered the Rail Passengers Council, which expressed disappointment at the failure to improve West Coast services.

"Passengers must be wondering when they are going to be see some compensation," Anthony Smith, the council's national director, said.

Louise Ellman, Labour MP for Liverpool Riverside, said it was an "utter disgrace" that taxpayers' money should be used to compensate for delays caused by Railtrack.