The Caledonian Sleeper is to be taken into public ownership later this summer, the transport secretary has announced.
Serco had its licence to operate the overnight cross-border rail link terminated early by MSPs last year after the firm attempted to renegotiate its contract.
The £800m agreement, signed in 2015, had been due to run until 2030, but Serco argued the need to exercise its “rebase clause” in an effort to put the service “on a more sustainable financial footing”.
However, Jenny Gilruth said the train will be operated by an “arm’s length” Scottish Government body from June 25, when the current agreement runs out.
Speaking at Holyrood, she said the move was “not a reflection on the quality of the product that has been developed” nor the “commitment of the staff who deliver the service,” but based on “value for money”.
The decision has been welcomed by rail unions, with RMT boss Mick Lynch praising the “sterling work” of former Scottish Labour leader Richard Leonard in helping drive the campaign for public ownership.
It brings Scotland in line with the Welsh government in nationalising ownership of all rail services just shy of a year after the ScotRail franchise was also taken over by Holyrood.
Gilruth said: “This decision has been taken following a detailed analysis of the options available, and in accordance with the current UK legislative framework and the Scottish Ministers’ Franchising Policy Statement.
“Having regard to continuing uncertainty regarding market conditions, travel behaviours and ongoing UK rail reform, it was decided that a direct award was not viable and that Sleeper services should instead be provided by the Scottish Government in line with their operator of last resort duty.
“Caledonian Sleeper staff will transfer to the new Scottish Government owned entity, with their terms and conditions protected.
“This approach will provide a stable platform for Sleeper services and certainty for passengers and staff.”
The rail link has operated in some form since 1873 and offers a Lowland service, between Glasgow, Edinburgh and London and a Highland version, which includes stops in Aberdeen, Inverness and Fort William.
Serco was previousy ordered to put an improvement plan in place after a series of strikes and the late delivery of new trains caused serious delays to the service.
Lynch said: “RMT has campaigned tirelessly for this win, and I congratulate every part of the union who had a hand in making this a reality.
“The Scottish Government has done the right thing and now joins the Welsh government in bringing all passenger services into public ownership.
“We thank the sterling work done by Richard Leonard MSP and other Scottish politicians who have supported us in this successful campaign.
“This decision should be a wake-up call to the Department for Transport in Westminster, to end its failed obsession with privatisation and bring the whole railway system into public ownership.”