Future of Rail Manufacturing

Grahame Morris Excerpts

Tuesday 23rd April 2024 Westminster Hall

[Grahame Morris (Easington) (Lab)]

I beg to move,

That this House has considered the future of rail manufacturing.

It is a pleasure to serve under your chairmanship, Sir Gary. I must declare an interest as a member of Unite the Union and chair of the Unite parliamentary group. I am also a member of the RMT and ASLEF parliamentary groups and I am on the Transport Committee.

For several years, industry organisations such as the Railway Industry Association, trade unions and manufacturers have urged timely action to prevent significant job losses in rail manufacturing here in the UK. The industry employs over 30,000 people in the United Kingdom and contributes at least £1.8 billion annually in gross value added. It is currently facing a very dangerous—indeed, critical—situation. The Minister, a former Chair of the Transport Committee, is very familiar with the situation. I have engaged with him on a number of occasions recently and in the Select Committee, so I am fully aware that he understands the nature of the problem.

In December last year, I raised an urgent question following evidence given to the Transport Committee by Nick Crossfield, the managing director of Alstom—Alstom is based in Derby. He impressed on the Committee the need for urgent action from the Government to expedite the bidding process for new British-manufactured trains. Four months later, it is clear that the Government have been too slow to prevent potential job losses at the Derby train manufacturer.

Similarly, I met workers at the Hitachi train manufacturing facility in Newton Aycliffe, next door to my constituency, who are also members of Unite the Union. They warned that we could see redundancies as early as June this year if the Government continue to drag their heels on extending the contract to build further trains for the west coast main line.

British railways are rooted in the north-east of England. The Stockton and Darlington railway was inaugurated in 1825 and was the world’s first passenger railway. It also linked the coalmines near Shildon in County Durham to the River Tees at Stockton, facilitating coal exports from Teesport. The Stockton and Darlington railway’s success, alongside growing demand for transport, spurred the development of a national railway network. The railways transformed Britain, enabling all social classes to travel further, and the network was developed to move coal from thriving collieries in County Durham to global markets. However, County Durham continues to struggle with the legacy of the loss of its coal industry, with limited skilled employment due to insufficient investment in levelling-up efforts, alongside a lack of a coherent industrial strategy under successive Conservative Governments.

In 2015, Hitachi opened a plant in County Durham, bringing skilled jobs to the region and reviving the north-east’s rail manufacturing tradition after 90 years. The 750 skilled jobs at Hitachi, and about 1,500 jobs in the supply chain, are fundamental to the success of the local economy.

Today, the excellent Sheffield Hallam University has released its “State of the Coalfields 2024” report, which shows evidence of a lack of jobs and businesses in the former coalfields despite recent growth. Job density in former coalfields is only 57 employee jobs per 100 working-age residents; that compares with a national average of 73 jobs per 100 residents, and an average in major regional cities of 88 jobs per 100 residents. There is a disparity, and a long way to go.

The report from Sheffield Hallam illustrates, as clear as day, the ongoing struggle for prosperity in former coalfield communities.

[Mr Kevan Jones (North Durham) (Lab)]

Would my hon. Friend agree that the issue is not just the number of jobs that Hitachi has brought to the region but the improvement in the skill base? Hitachi is training apprentices and increasing the skill base locally through investments in higher education and other things. That helps not only Hitachi but the regional economy.

[Grahame Morris]

Absolutely. My right hon. Friend makes an excellent point about the broader benefits to the economy. Indeed, the loss of rail manufacturing in County Durham or Derbyshire would devastate their respective regional economies and threaten British rail manufacturing.

Alstom, Hitachi, Siemens and CAF—Construcciones y Auxiliar de Ferrocarriles—remain the only train manufacturers in the UK. A similar situation arose with the steel industry. To a reasonable person, it would seem illogical for the Government to permit the UK to lose its capacity to build trains, especially as our existing network is in need of modernisation.

The Minister and I have fenced about the age of the rolling stock and trains, but the UK still operates trains built before privatisation, with the average age of trains on the Chiltern line estimated to be 30 years; that was in March last year, from the Office of Rail and Road report. Additionally, nearly half all operators use trains over 22 years old. The Railway Industry Association has urged the Government to upgrade or replace approximately 2,600 vehicles by 2030, and to renew around 1,650 diesel trains that will be 35 years old after 2030.

The industry-wide consensus is that our rolling stock is outdated and inefficient. Therefore, my question to the Minister is: why are the Government not protecting British rail manufacturing, especially given the rising demand for new trains to enhance the passenger experience and to meet our net zero targets? In relation to our environmental targets, all 2,898 diesel and 912 bi-mode trains in the UK emit carbon dioxide and nitrogen oxides, with nitrous oxide—N₂O—having various health impacts and being up to 280 times more potent than CO₂ in warming the planet over a 20-year period. That is according to the latest Intergovernmental Panel on Climate Change report to the United Nations.

To achieve net zero by 2050, a solution must be found to replace diesel trains, which are currently used by 14 operators—especially since only 38% of the network is currently electrified. My constituents, who travel on unreliable, second-hand ScotRail Sprinter trains—no offence to my friend from Scotland, the hon. Member for Paisley and Renfrewshire North (Gavin Newlands)—built in the 1980s, find it inconceivable that the rolling stock companies’ profits are sky high while our UK-based rail manufacturers are crying out for orders. Taxpayers are forced to travel on substandard trains purchased with Government funds, while subsidies remain at twice pre-pandemic levels. The system is inefficient and does not serve the taxpayer or the travelling public.

There are needless links in the chain. The Government should streamline the system by directly purchasing trains and bypassing the ROSCOs or rolling stock companies. Indeed, RMT president Alex Gordon and general secretary Mick Lynch have been vociferous, voicing concerns about leasing costs, which have risen by over 30% over the past five years while rail industry staff costs have remained static.

A decade ago, leasing rolling stock accounted for about 13% of train operating companies’ costs; today, it accounts for 25% or a quarter. Does the Minister think that is fair or are the Government protecting profits when other areas of the network, including the staffing elements, are facing dramatic cuts?

Clearly, there is something wrong with how we procure rolling stock in Britain. Despite needing modern, carbon-neutral and sustainable trains, the Government have ignored warnings from both Alstom and Hitachi. The Rail Industry Association warned the Government that recent administrations have been a “canary in the coalmine” before the potential decimation of train manufacturing in the United Kingdom. Unite the Union warns that the industry’s performance relies heavily on Alstom Transport and Hitachi Rail, which hold 55.3% of market share.

The industry’s fate is dependent on key players like Hitachi and Alstom. However, recent forecasts indicate a bleak outlook, with revenues projected to decline at a rate of 8.1% annually over the next five years. Hitachi and Alstom face challenges, as their order books require clearing past orders before they can commence construction and setting up production lines for the HS2 trains, which are currently 18 to 24 months behind schedule.

Government intervention must go beyond rhetoric to provide tangible support to the industry. We are not asking for a bail-out—just a commitment to honouring existing contracts, and to establish a sensible industrial strategy for the industry. Beyond extending existing contracts, a focused industrial strategy is imperative. Research conducted by Make UK reveals that 99% of manufacturers support the need for an industrial strategy. Six in 10 cite the lack of an industrial strategy as a factor affecting growth in the manufacturing industry. Some 87% believe a strategy would provide their businesses with a better long-term vision on which to decide investment in future employment plans. To prevent another Alstom or Hitachi scenario, we must reassure the industry that the Government are prioritising its interests. I am hopeful that the Minister is going to give us some positive news, but the consequences of inaction are dire. Jobs and livelihoods are at risk, and it is time now for some decisive action.

The industry requires a steady stream of orders to sustain manufacturing and maintenance bases, alongside a proactive approach to replacing retiring engineers. We must abandon costly leasing, opting for direct purchases through Government procurement to bolster UK train manufacturing, which must be central to a long-term rail and industrial strategy, driving economic growth, innovation, and meeting our future transport needs.

[Several hon. Members rose—]

--- Later in debate ---

[Grahame Morris]

The hon. Member is making some excellent points. On ROSCOs, I remind hon. Members that in the current year, I believe that they are making in excess of £400 million in profit.

[Gavin Newlands]

I would not disagree with the hon. Member on that.

To continue on ROSCOs, nobody has ever satisfactorily explained why we continue to have a system whereby rolling stock companies, which are all owned by private equity and investment funds, are the primary owners of multiple units, locos, passenger carriages and freight wagons, rather than the taxpayer, who ultimately pays for them. ROSCOs are generating almost risk-free profits for their owners, which are almost exclusively overseas funds, because ultimately, private rail operators have the Department for Transport as an operator of last resort. They were gifted BR stock at a bargain price and have spent the last three decades coining it in every time a new fleet is needed for an operator. That is just one example of the billions leaking out of the system to private finance that could instead be invested in the public rail network or in a sustainable and properly managed rolling stock procurement programme.

To conclude, the current model has failed. It was failing 30 years ago, it has failed since then, and it will continue to fail for the next 30 years unless this issue is specifically addressed in any rail reform package that is brought forward by this Government or any future Government.

--- Later in debate ---

[Grahame Morris]

Thank you, Sir Gary, for the exemplary way in which you have chaired the debate. I thank the Minister for his thoughtful and considered responses. We are all aware that he knows the solutions to the problem and we seek to push him to make the decisions that are required in the interests of retaining those jobs, directly and in the supply chain, as quickly as possible.

I thank my right hon. Friend the Member for North Durham (Mr Jones), my hon. Friends the Members for Portsmouth South (Stephen Morgan), for Stockton North (Alex Cunningham) and for Ilford South (Sam Tarry), as well as my colleagues and comrades from the Transport Committee, the hon. Members for Paisley and Renfrewshire North (Gavin Newlands), for Milton Keynes South (Iain Stewart), and for Sedgefield (Paul Howell). I particularly thank the respective Front Benchers for their responses.

Without action, we will be modernising or replacing our trains with imported units using taxpayers’ money to support thousands of jobs and apprenticeships overseas rather than in the UK. We implore the Minister to act, and to preserve the excellent jobs that we have in our existing manufacturing centres.

Question put and agreed to.

Resolved,

That this House has considered the future of rail manufacturing.