London cycle hire operator Serco penalised £5m

The private firm that runs London's cycle hire scheme is to have £5m withheld by Transport for London (TfL) because of problems with the service.

Serco was told to improve after a series of administration errors led to users being overcharged.

TfL said it was issuing Serco with a "critical improvement plan" as the firm had "not reached the consistently high standards we expect".

Serco said it agreed "some aspects of the service still need to be improved".

In late May, Serco overcharged 577 Cycle Hire users a total of £3,182.

'Immediate improvements'

The firm refunded this money and also paid more than £6,000 in compensation to some bike users as a "goodwill gesture".

Serco's contract to run the scheme is worth £140m over six years.

TfL said its critical improvement plan "detailed what we need to see delivered for Londoners and we expect to see immediate improvements".

A Serco spokesperson said: "We are committed to delivering the service to the consistently high standards TfL expects, and which users deserve."

Each day, about 22,000 people use more than 5,000 cycle hire bikes in the capital.

The scheme, which began in July last year, currently operates in Camden, City of London, Hackney, Islington, Lambeth, Kensington and Chelsea, Southwark, Tower Hamlets, Westminster and several of the Royal Parks.

By 2012, about 2,700 docking points will be created in east London and another 1,500 will be added across central London, TfL has said.