Westcountry rail passengers face fresh "uncertainty" after FirstGroup decided to pull the plug on its £1.2 billion Great Western rail franchise three years ahead of schedule.

The group has triggered a unique get-out clause which will end the 10-year contract in 2013 and save it an estimated £826 million in repayments to the Government.

It says it wants to bid for a new longer-term deal and has served notice well ahead of next year's deadline, leaving ministers almost two years to conduct a tendering process.

Transport analysts say the move could benefit passengers and provides an opportunity to reduce journey times, increase services and extend electrification of lines to Devon and Cornwall.

Neill Mitchell, an independent regional transport analyst, said the Department for Transport (DfT) may have given the group "a steer" that longer franchises of as long as 20 years would be "up for grabs".

He said the decision heralds a "disruptive period of uncertainty" with tension between civil servants "micro managing" services and a Treasury seeking to "squeeze" more cash from the franchise.

"It might be quite helpful that FirstGroup has brought matters to a head because the rest of the industry is pressing for longer-term franchises," he added. "A 20-year franchise would allow companies to knuckle down and invest, bucking any short-term period of uncertainty.

"We will either see the next franchise sewn up by the DfT or liberated to be run as a normal private company."

Despite announcing a 23 per cent rise in profits to £108 million yesterday, FirstGroup said it had taken a "commercial decision" following the Government's "franchise reform and major investment in the region"

A spokesman said: "The Government has committed significant investment to transform rail services in the region and we believe that, through our unrivalled expertise and experience, we are best placed to manage these projects and we intend to bid for the new Greater Western franchise."

Passenger groups are concerned that hard-won improvements in the region, such as extra trains laid on over and above the franchise and the booming branch line sector, be maintained as the company focuses on its future bid.

Anthony Smith, chief executive of watchdog Passenger Focus, said the next franchise contract was an "opportunity" to "focus on better value for money, punctual trains and more frequent services."

Mathew Lee, partner at South West accountants Bishop Fleming, said FirstGroup had faced a "dilemna" with huge investment needed for electrification and the company was "putting pressure" on the Government.

"They have got to spend millions on new rolling stock and the lead times on these things are enormous – they won't want to invest if they are not going to be the franchisee," he added.

"The best thing for passengers and consumers is the creation of longer term franchises so that companies can make the correct decision for a rail network that works."

Richard Burningham, manager of the Devon and Cornwall Rail Partnership, said he expected a new franchise of at least 15 years.

"The haphazard attempt to cuts costs in 2005 caused mayhem and nobody wants a repeat," he added.

"It will be interesting to see if the DfT includes priced options on top of the core agreement which could see companies bidding to increase the frequency of services or even reopening lines."

Annual figures released yesterday by the group, which also runs the Capital Connect, ScotRail and TransPennine Express services, showed revenues up by 6.5 per cent to £2.27 billion.

But the Government's announcement last month that the delivery of a new fleet of high speed trains would be delayed until 2016 is thought to have made the franchise less profitable and influenced the decision.

The Department for Transport said it "had always anticipated" the franchise could end in two years and had "catered for this eventuality" it in its refranchising programme.

Asked about the length of a future term, a spokesman said the company was "looking at longer-term franchises".

Rail Minister Theresa Villiers said: "The decision will not affect the provision of services on their network."