The SRA hopes the deal will be finalised soon

The Strategic Rail Authority (SRA) said the new Northern franchise can not take place because of a hitch in its negotiations with the company Serco.

The UK-Dutch consortium was due to start the new arrangement, combining two existing franchises, on 17 October.

Arriva Trains Northern and First North Western will carry on for the time being as existing incumbents.

Both companies lost out to Serco Ned in bidding for the new franchise.

General secretary of rail union, the RMT, Bob Crow said today: "Franchising out rail services costs the industry millions as it is, but this mess is going to cost even more and will create massive uncertainty for rail workers and passengers alike."

He added: "The Government and the SRA now have an opportunity to draw a line under this sorry saga and bring the Northern Rail franchise back into the public sector where it belongs as has been done successfully with South Eastern trains."

An SRA spokesman said the group was in discussion with the Department of Transport and Serco was still the preferred bidder.

He said he hoped the deal would be signed as soon as possible and there would be no effect on services.