Connex said it was shocked by the unexpected announcement

In what the troubled company described as an unexpected decision, the Strategic Rail Authority (SRA) withdrew the franchise two years early due to poor financial management.

It will continue to run services until the end of the year rather than 2006, the SRA said on Friday.

Connex said it disagreed with the SRA's move and signalled it could take some action, but it declined to comment further.

Chief executive Olivier Brousse: "Whilst we acknowledge the SRA's decision, we strongly disagree with the reasons behind it. We are considering all our options."

The SRA gave �58m of public money to the French-owned Connex last December to keep the company running, on the proviso that it improved its financial performance.

But the operator recently requested another �200m in subsidy.

SRA chairman Richard Bowker said: "This is a decision we have taken to protect taxpayers' money and passenger delivery."

Interim company

An interim company will take over in the new year and a tendering process held to find a new franchise holder, probably within 18 months.

Both Connex and the SRA, which oversees railways on behalf of the government, insisted services would not be affected while a new company is chosen.

The termination of the franchise will still allow Connex to bid for other franchises, Mr Bowker said.

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It has expressed an interest in running the Trans-Pennine Express and trains in Wales and Borders.

Connex originally won a 15-year franchise deal when the British railways were privatised in October 1996.

But the service was soon hit by delays, cancellations and financial difficulties.

Two years ago Connex became the first operator to lose a franchise since privatisation when it lost control of the south central area in a competitive bidding process.

About one in five Connex South Eastern trains run late, according to the most recent punctuality figures.

But the SRA said it was the overall financial management of the southeast franchise, rather than its "operational competence", which was causing concern.

'Tough targets'

"This is not a question of the operational competence of Connex, but there has been a serious loss of confidence that we have in the ability of the company to run the business in its widest sense," Mr Bowker told the BBC.

"We set Connex some very serious and very tough targets last year. They have not met those and we decided to take some very firm and decisive action."

Long-suffering commuters were pessimistic that improvements would be made.

"If they get better and we get a better service, that's great news, but I'll believe it when I see it," said Dave Regan, 43, from Bexley.

Connex runs services in the southeast

Solange Vennink, 43, from Rainham in Kent, said: "I doubt if it will ever improve. I've written to them with so many complaints.

"But I think the only thing they have tried to mend is the air conditioning. They certainly haven't improved the service."

Lobby groups were also doubtful about the promise of improvements.

The Rail Passengers Council said: "It is good to see the SRA is not prepared to bail out Connex further and is taking decisive action" - but added that the interim company would be watched carefully.

'Privatisation crisis'

Bob Crow, general secretary of the biggest rail union the RMT, said the SRA should have gone further.

"Here is further proof of the crisis of privatisation," he said.

"Here is an opportunity to begin bringing train operations back into the public sector where they belong. If Connex is unfit to run its franchise, why leave it in the company's hands for another six months?"

ASLEF, the union for train drivers and operators, said passengers face "a run down service for the rest of the year and for the industry as a whole."