TROUBLED Connex could be handed a key North-East rail franchise - despite yesterday being stripped of its southern services for financial incompetence.

The train operator was effectively sacked from its job of running the London and South-East commuter franchise after Strategic Rail Authority (SRA) chiefs said they had lost total confidence in it.

Speculation was growing last night that Connex is now in pole position to win the race to run the Trans Pennine Express (TPE) franchise.

The Northern Echo has been told by a number of reliable sources that a deal may already have been struck allowing Connex control of the route which links Newcastle and York with Leeds, Manchester and Liverpool.

An announcement is expected, possibly within days, on a successful bidder for the franchise with the partnership of First Group and French transport operator Keolis also in the running.

York councillor Derek Smallwood, chairman of the Trans Pennine Local Authority Rail Group, said: "It is of great concern to us that Connex should lose this South-East franchise by failing miserably to meet requirements."

Both Connex and First Group have been forced to revise their initial proposals for the route with the SRA evaluating the spiralling cost of a number of franchises.

"The likelihood of getting new rolling stock is nil," said Coun Smallwood. "Unless we get upgraded trains we are still going to finish up with a second class service."

SRA chairman Richard Bowker said Connex had failed to meet tough financial management standards, despite getting an extra £58m subsidy last year.

Connex, which has also suffered from poor punctuality, wanted more cash, but the SRA decided to pull the plug on its franchise three years early.

SRA spokesman Paul McKie said: "The SRA is due to decide on the preferred bidder for Trans Pennine. What has gone on with Connex does not have any relevance to that."