Future of Rail Manufacturing

Alex Cunningham Excerpts

Tuesday 23rd April 2024 Westminster Hall

[Alex Cunningham (Stockton North) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Gary. I am terribly concerned that Britain is facing a cycle of managed decline, so I congratulate my hon. Friend the Member for Easington (Grahame Morris) on securing this debate, which addresses some of that.

I spoke to Hitachi Rail ahead of this debate, and it cannot be stressed enough that if the Government do not take robust action, the company will see a colossal loss of skills and capability, and could be talking to its staff within very few months. Let us not forget that, thanks to an agreement with the Government of the day and as a consequence of the tremendous work of my former colleague Phil Wilson, it invested £110 million to open the state-of-the-art train manufacturing facility in 2015. It has 750 highly skilled workers and supports 1,400 jobs in the wider supply chain—many in my Stockton North constituency. Now, just nine years later, the company is needlessly facing a gap in its workload. It has a two to three-year production gap from when the last train leaves in March 2025. Unite’s press release confirms that work on those contracts is set to decline by October 2024.

Hitachi Rail tells me that it started engaging with the UK Government more than two years ago on this issue, and more importantly, on the solution. There was a visit from the Prime Minister, who was briefed on the challenges and the solutions. During that visit, he promoted the world-class manufacturing taking place. Hitachi Rail identified a contract variation for an additional 29 of the Avanti West Coast trains that are currently being manufactured. The volume of work and the ability to exercise and option an existing contract in the necessary timeframe made this the best way to maintain the skills base and bridge the production gap to HS2. It is a genuine long-term solution to the challenge.

As part of those discussions, Hitachi Rail also proposed the hybridisation of the Newton Aycliffe site, which entails investment so that maintenance work, bogie overhaul and repair work can take place at the site. However, those hybridisation—that is a new word to me, Sir Gary—solutions alone cannot maintain the manufacturing skills base. After two years of regular engagement, the UK Government informed Hitachi Rail in March 2024 that they were unable to exercise that option, citing the risk of third-party legal action as being too high.

Receiving a negative decision so late in the process means that finding viable solutions in the necessary timeframe increases the risk for the workforce. Of course, it is 19 years not nine years since the factory opened. Sharon Graham, Unite’s general secretary, said:

“The government needs to pull its finger out and tender the extension of the West Coast contract to Hitachi immediately. Ministers talk a good game about levelling up. The fact is, however, that at both Hitachi in Newton Aycliffe and Alstom in Derby, workers are in disbelief that ministerial incompetence is delaying announcements that would safeguard highly skilled jobs.”

We in the north-east have been let down time and again by the Tory Government. Not so long ago, the world-renowned Cleveland Bridge and Engineering Company at Darlington was abandoned. Before that, they abandoned primary steelmaking, and not long after that, they failed to support the communities that had invested in the Sirius mine and allowing it to be sold to one of the world’s biggest companies.

It is vital that trade manufacturing in the UK is seen as part of the long-term strategy for rail and that it does not go the same way as the likes of Cleveland Bridge and Engineering Company, which built the Sydney Harbour bridge and the Tyne bridge, among others. Some of the best trains are being built in this country, and we need to do much more of that. A Labour Government would exercise the option to bring forward the work, and today’s Government should do likewise. I hope the Minister understands that and will revisit all the negative decisions taken around this crisis to ensure the industry’s long-term and continual viability.

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[Stephen Morgan (Portsmouth South) (Lab)]

It is a pleasure to serve with you in the Chair, Sir Gary.

I start by thanking my hon. Friend the Member for Easington (Grahame Morris) for securing and opening this important debate. It has been a well-informed and timely debate, and I thank all hon. Members for their contributions to it. My hon. Friend spoke with real knowledge and understanding of the transport network, including the current challenges facing the rail sector and rail manufacturing. He spoke about the consequences of a lack of an industrial strategy and the value of rail manufacturing jobs, not only to local communities but to wider regions, stressing the need to honour existing contracts to help secure the future pipeline of work.

My right hon. Friend the Member for North Durham (Mr Jones) was absolutely right to say how vital a steady drumbeat of work is to secure rail manufacturing for the future. I know that he knows that very well from his extensive work on shipbuilding and I thank him for the points that he has made today.

Other Members made very valuable points with regard to the need for a long-term, holistic view of what is required to secure work for the future. My hon. Friend the Member for Stockton North (Alex Cunningham) shared concerns about the delays in ministerial announcements and the implications of those delays, while my hon. Friend the Member for Ilford South (Sam Tarry) spoke about the Government not taking seriously their commitments to support industry and jobs, and about what that means in terms of putting the sector at risk.

As we have heard, Britain’s rail manufacturing is in a state of crisis. In Derby, 1,300 jobs are at risk at Litchurch Lane, a factory that has been making trains for 150 years. Another 700 are at risk in Newton Aycliffe, and more than 16,000 jobs are at risk in the supply chains.

Behind these jobs are people with decades of experience and expertise and centuries of family history in our rail sector. When I visited Alstom last year, I met people who were following in the footsteps of their parents, grandparents and great-grandparents by working on that site. They had no plans to leave, but the uncertainty of the past has already caused so many to do so. This uncertainty has been extremely worrying for those in jobs that are at risk and for the rail sector as a whole, which has been unable to plan for the years ahead.

The frustrating thing is that all this has been avoidable. Both Alstom and Hitachi are clear that their uncertain future is thanks to the Government’s inaction. Ministers have been warned about the feast and famine of rolling stock pipelines for years, yet they have continued with the short-term, sticking-plaster approach, which has created a crisis in our rail manufacturing sector. Instead of confronting this problem, the Transport Secretary spent months with his head in the sand, saying that a deal to save jobs was out of his hands. As a result, deadlines were missed, skilled workers have left for jobs elsewhere and supply chain companies have gone bust. The contractor Paintbox went into administration last year when its work painting new carriages in Derby dried up. Motherson, which did the wiring on trains, pulled out of the site, and Solo Rail Solutions in Birmingham, which made the doors, appointed administrators earlier this month.

This is not just about job losses; what the Government do not seem to recognise is that huge industries cannot simply be turned on and off. Laying off workers means a loss of skillsets that take years to replace. It also means a loss of capability in the British market, which means less competition, more imports and rising costs for future procurements.

Last week, the Transport Secretary proposed a last minute order of Elizabeth line trains from Derby, but no formal deal has yet been reached. However, if one is reached, let us be clear what this will mean: another short-term sticking plaster that reveals the gaping hole in the Government’s non-existent industrial policy and means we are likely to have another groundhog-day experience with Hitachi in the months to come—more workers fearful for their job security, more families moving away due to uncertainty and more supply-chain companies struggling to survive.

[Alex Cunningham]

In my speech, I mentioned that the Government are using their problem with the level of risk to bring forward procurement. Does my hon. Friend agree that we have to balance that risk with the risk of losing all those skills in cases such as that of Hitachi?

[Stephen Morgan]

My hon. Friend is absolutely right. We need to bring consistency and clarity to the sector, so that the investment can take place. Many Members have said as much, and I thank my hon. Friend for putting that message on record.

This is a time when our rail industry needs certainty, stability and leadership. The managed decline that we have seen from this Government is only putting our railway jobs at risk. The Minister has many questions to answer. Other hon. Members have already asked many questions, so I ask him only one: what is he doing to stop a repeat of what we have seen in Derby over the past year happening in Newton Aycliffe in the coming months and elsewhere down the line? I look forward to hearing the Minister’s response and would like to restate my thanks to my hon. Friend the Member for Easington for tabling this debate.

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[The Minister of State, Department for Transport (Huw Merriman)]

With pleasure, Sir Gary. It is a pleasure to serve under your chairmanship. I start by thanking my good friend, the hon. Member for Easington (Grahame Morris), for securing this important debate on the future of rail manufacturing and for his engaging and impassioned speech. He is always a real warrior for the railway and the workforce. Rail remains a top priority for the Government. It connects people to places, delivers the goods we rely on and, as we have heard during the debate, supports jobs in our communities.

Turning straightaway to rolling stock manufacturing, since 2012 the Government have commissioned 8,000 new rolling-stock vehicles—that is out of the 15,600 we have in total. That has encouraged four train manufacturers to set up shop here in the UK. It is worth stating for the record, because it could have been missed in what has been said this afternoon, that in 2010 there was only one train manufacturer. We now are proud to have four. We are very keen to ensure that the four thrive and survive. I will come on to that point later in my speech.

These businesses are now assembling and building trains, while bringing growth to local communities. The average age of rolling stock has fallen from 21 years in 2016 to just under 17 years today. The hon. Member for Easington pointed to one particular train operator that has had a longer tenure, but I tend to look at the entirety of the network, and the average age is under 17 years, which is less than half the average life span for a vehicle, which tends to be 35 to 40 years. Britain’s modernised fleet of trains offers improved comfort and services to passengers across the country, while benefiting the UK rail supply chain, which came together to design, manufacture, paint and assemble the new trains. We have a workforce to be proud of. It is right that train manufacturing is a competitive, commercial market.

[Alex Cunningham]

The Minister was talking about the comfort of travelling by train. I would like to personally invite him to take a trip with me from Darlington to Saltburn on the train one day, and we will see what comfort we have to put up with in the Tees Valley.

[Huw Merriman]

Look, I travel by train all the time, not just on my own line, which I believe has the oldest train stock, but across the country. I spend every single week travelling by train across the country. I am sure at some point I will experience that part of the country as well. The facts do not lie. Out of our total of 15,600 trains, 8,000 are new trains that have been built since 2012. That shows that improvements are happening, but there is more to do, and I am always keen to do more.

It is vital that rolling-stock-owning companies continue to play their role. The private sector has invested around £20 billion to transform our train fleets for passengers. Trains are major assets, and there will naturally be procurement cycles. Our travel habits have changed since the covid pandemic. While passenger numbers are now stabilising, we are still seeing a reduction in revenue. Despite this, the order of 54 high-speed trains for phase 1 of High Speed 2 remains unchanged. There has also been a sizeable contract awarded recently to LNER, and there are upcoming procurements in the market being run by Northern, Southeastern, TransPennine Express and Chiltern. This process will be open to all manufacturers, as is right. Over the next two to three years, we envisage contracts being signed for over 2,000 new vehicles, with a total value of more than £3.6 billion.

Competitions for procurements to upgrade existing rolling stock fleets are also in the works. East Midlands, Chiltern and CrossCountry are due to modernise their existing fleets. With several other operators, such as Avanti West Coast and the Angel Trains Pendolino fleet, refurbishment is already under way. None the less, we recognise that some manufacturers face gaps in their order books over the next two to three years. I disagree with the claim by the hon. Member for Easington that the Government have not acted quickly enough on potential job losses at Alstom and Hitachi. The Secretary of State and I have been involved in discussions with both companies over several months.

This is a complex issue. There are no straightforward solutions, and any intervention must comply with the law while ensuring value for passengers, taxpayers and Governments. As I referenced in the Chamber last week, Siemens gave us a good example of that by challenging in court the award for HS2 that went to Hitachi and Alstom. The Department was found to have won on every single point. That acts as a guiding point for how we must make our tendering process work. If we do not make that work and we award contracts that are ruled unlawful by the courts, we create more uncertainty for the workforce, which we are doing our best to help.

[Alex Cunningham]

Will the Minister give way?

[Huw Merriman]

I have not got time, so I am sorry, I will not give way.

I am pleased to report my right hon. Friend the Transport Secretary had a constructive meeting last week with Alstom’s chairman and CEO and its UK and Ireland director. We have now entered a period of intense discussion with the company. It would not be appropriate to go into the details of those conversations at this stage. Work continues at pace, and I know the Transport Secretary plans to update the House at the appropriate time.

With regards to Hitachi, last week the Transport Secretary met Unite’s assistant general secretary and representatives from Hitachi’s Newton Aycliffe plant. I met a representative from Hitachi in Parliament yesterday as well. The Secretary of State was able to explain the facts of the situation and the Government’s position, facilitated by my hon. Friend the Member for Sedgefield (Paul Howell), who has assisted greatly. The Department remains keen to work closely with Hitachi to help the company find a solution. We strongly encourage Hitachi to continue to engage constructively with us.

The future for our plants is very much focused on exports, as it has to be. Now that we have four train manufacturers it is key for us to work with those manufacturers so that products that are designed and built in the UK are exported abroad and we can grow the plant. I will add that when it comes to rail infrastructure investment, we have published a £44 billion five-year funding settlement for Network Rail’s operations, maintenance and renewal activity in 2029, which provides further opportunities for UK rail manufacturers and suppliers.

The key to the future of rail manufacturing is to continue to invest in rail across the entire network. The £12 billion that we have just announced to help Northern Powerhouse Rail better connect Liverpool to Manchester and deliver new routes and stations across the north will provide more opportunities for train manufacturers and the rolling stock that they will produce. That is where the TransPennine route upgrade will help with the TransPennine Express order, which is to market. Of course, Network North also saw our commitment to deliver on the Ferryhill scheme, subject to a successful business case at each stage. I thank my hon. Friend the Member for Sedgefield for his unwavering commitment.

It has come up a number of times, so I will thank the Transport Committee for its work carrying through rail reform as the pre-legislative scrutiny Committee. I note there are six current or former members of the Committee in the Chamber for this debate. The Chair of the Committee, my hon. Friend the Member for Milton Keynes South (Iain Stewart), is spot on in saying that it gives us a longer-term, holistic approach to allow the railway to organise itself. One would hope that industry will be better supported by that holistic approach. I am very grateful for the work that the Committee is doing.

Time does not allow me to continue, but I shall conclude by saying that I cannot overstate the role of rail manufacturing in supporting a growing economy. We are really proud of the four train manufacturers we now have in this country. We want to do everything we can to work with them and the individuals working in the wider rail supply chain. Their jobs matter hugely to us. We understand the uncertainty and we are working hard to unblock it. That is why the Government are committed to working with businesses to overcome the challenges and maximise the opportunities ahead, both at home and abroad. We work towards our shared ambition to bring track and train together with rail reform, and support our fantastic rail and train manufacturers.