The firm has agreed to put the £1.4billion rail franchise back into public ownership as it confirmed the departure of its chief executive who sanctioned the bid for the high-speed route, which links the North East to London.

The franchise, which is understood to have lost £20million in the first half of the year, is suffering from a slump in passenger numbers.

Ministers have refused the company's requests for its contract with the Government to be renegotiated but have stated that passengers will not notice any difference in the quality of service.

National Express was contracted to pay the Government to run the East Coast Mainline, which runs between Edinburgh and London, until 2015.

Transport Secretary Lord Adonis said: "The Government is not prepared to renegotiate rail franchises because I'm simply not prepared to bail out companies that are unable to meet their commitments."

Earlier this week, rival transport company FirstGroup said a takeover approach made for National Express had been rejected.

In a trading statement, National Express said that the "challenging economic environment" meant it was seeing fewer passengers on the East Coast Mainline, and "significant" levels of people downgrading from first-class and full fares.

However, the firm said it does not expect that the Government's intervention would "result in cross default of the group's other rail franchises" – which are East Anglia and coast to coast.

It added that it did not believe the Government would be able to recoup any losses from the franchises from National Express.

The firm is trying to reduce a debt pile of about £1.2billion.

Cuts have been made in dividend payouts to shareholders and other spending, while 750 jobs have also been lost.

Last month, the company started charging passengers for reserving a seat on its East Coast and East Anglia franchises, an announcement which attracted criticism on Wearside.

Washington MP Sharon Hodgson criticised the move to introduce the £2.50 charge for customers.

She said the charge was the latest in a string of price hikes by rail networks and raised concerns that people would rather stand or decide to travel by budget airline or car instead.

"It's outrageous that thousands of people in the North East will have to pay for a seat after already forking out for a ticket," she said.