The British government has scrapped a controversial decision to strip Richard Branson's Virgin Group of a major rail franchise, citing significant flaws in the way the decision was made.

The government announced in August that it was awarding a 13-year franchise to run the west coast London-to-Scotland service to Virgin's rival FirstGroup.

Branson denounced the decision as "insane," questioned whether FirstGroup could meet its financial commitments and vowed to fight the government in court.

Transport Secretary Patrick McLoughlin announced Wednesday that he had canceled the competition to run the line because of "deeply regrettable and completely unacceptable mistakes" made by his department in the way it managed the process.

He said staff had been suspended and an investigation had been launched.

The bidding process will be rerun.