Future of Rail Manufacturing

Lord Beamish 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.

--- Later in debate ---

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

May I say what a pleasure it is to serve under your chairmanship, Sir Gary?

I congratulate my hon. Friend the Member for Easington (Grahame Morris) on securing this very important debate. He and the hon. Member for Sedgefield (Paul Howell) said that the north-east has a long tradition in rail manufacturing, and it is one we should be proud of, but it also has a future. It had a future when we secured the investment in the Hitachi factory in Newton Aycliffe, which supported not only 700 highly paid jobs but the supply chain. People should remember the history of how we got Hitachi in the north-east. I pay tribute to Durham County Council; the NDA, which the coalition Government abolished, and Phil Wilson, who was the MP for Sedgefield and a great champion of getting that investment.

Why did Hitachi come to Newton Aycliffe? It saw opportunities in the tradition, but also the opportunities in the workforce. It came there because it saw the growth in the UK market, as well as in exports to Europe. Well, Brexit has dealt a hammer blow to that, but Hitachi was still determined to contribute to the development of the UK rail industry. Remember that the Japanese do not take short-term decisions; they take long-term investment decisions. They invested because they saw a pathway of work in the UK.

The hon. Member for Sedgefield talked about the challenge and about not making the issue political. Well, I am sorry, but this is a political decision. As he said, it is about ensuring that we have a rail strategy, and that is about UK factories, including Newton Aycliffe, having consistent orders. The answer is in the Government’s hands. He is a member of the governing party, and he cannot say that there is no solution. There is. The solution is ensuring that there is a drumbeat of orders, not just for Newton Aycliffe but for the rest of UK rail manufacturing, so that we get long-term supply chains in place and retain skills.

Hitachi quite clearly has a gap coming up for two years before HS2 comes on stream. I am sorry to tell the hon. Member, but we cannot treat the skills that have been developed at Newton Aycliffe like a tap, turning them on when we want them and turning them off when we do not. We have to invest in them and keep them there. Those people’s livelihoods are important. If the next generation of rail workers are to come through, we need the investment and the certainty that those young people will have a future, not just necessarily at Hitachi but in the wider rail industry.

[Paul Howell]

I will probably surprise the right hon. Member by agreeing with him. The way in which the Japanese and Hitachi work is all about generational levels of training, investment and continuity. I endorse his point about the need for skills to be invested in and continued over long periods of time.

[Mr Jones]

I agree with the hon. Member, so why does he not criticise his own Government, who are not investing in the long-term strategy we need? We have had it in the shipbuilding industry and we have a shipbuilding strategy that makes that exact point: we need a drumbeat of orders. That the Government decide to put warships over to Spanish and not UK yards makes a mockery of their commitment to such long-term strategies.

If we are serious about levelling up, this is it in action. Levelling up is nothing new; the last Labour Government saw the need for it. It was the reason why we were involved in the NDA and why we attracted Hitachi to the north-east. I must say that it takes a lot, having dealt with Japanese politicians and industry for a number of years, for them to make the public statements they have made about the future of Newton Aycliffe. It is in the Government’s hands to ensure that we have the continuation of skills. Without that, it has a bleak future.

I pay huge tribute to the management and staff at Newton Aycliffe. With my hon. Friend the Member for Easington, I met representatives of Unite the union the other day and they are fully committed to the future of the plant. They are the people who want to ensure that not only they but future generations have jobs. The answer to Newton Aycliffe’s future is in the hands of the Government, who can make sure that in the next few years we have a continuous stream of orders going through, but this is not just an issue for Newton Aycliffe; other plants face it as well. It comes down to the sad fact that for the last 14 years of Conservative Government, there has been a lack of industrial strategy across the UK. This is a good example not only of how that lack of strategy will endanger our great jobs in Newton Aycliffe but of how hollow all the nonsense spoken about levelling up over the last few years has been.