Lack of orders puts future of HS2 train factories in doubt

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The future of two factories set to build trains for the High Speed 2 line from London to Birmingham is in doubt because a lack of other orders may force their closure before the work is due to begin, Hitachi and Alstom have warned. 

Ministers this week told Hitachi that they would not place a new order for conventional trains that would have kept its Newton Aycliffe plant in the north-east of England in business until the HS2 build began in 18 months, according to people familiar with the matter. 

Meanwhile, France’s Alstom has told the Financial Times that it had “all but run out of time” to secure the future of its plant in Derby because it also faces a gap in production.

Train companies are technically in charge of making rolling stock orders, but their budgets for these are set by the government. 

Hitachi and Alstom in 2021 won a contract worth up to £2.8bn to build 54 trains for HS2 rail line.

But last year Prime Minister Rishi Sunak cancelled the northern leg of HS2 from Birmingham in the Midlands to Manchester to rein in spiralling costs on what has been the most expensive infrastructure scheme in Europe.

HS2 will still require custom-built trains, but they will run on existing lines north of Birmingham.

The initial stages of vehicle body assembly and fit-out are set to be carried out at Hitachi’s plant in Newton Aycliffe while the second stage of fit-out and testing will be done at the Alstom factory in Derby.

The Hitachi factory, which employs 700 people, opened in 2015 and is making its final trains for Avanti West Coast and East Midlands Railway.

Ministers told Hitachi this week they had no plans to order more trains to run on the west coast mainline. That order was seen as the only viable way to plug the production gap. The decision has heightened the risk of significant lay-offs, or even the closure of the plant, although no final decisions have been made, one of the people said. 

Doubts over the future of the Newton Aycliffe plant have led some industry executives to suggest that the HS2 trains could end up at least partly built in factories outside of the UK. 

In a statement, Hitachi said it was reviewing its options

“We have been engaged in discussions at all levels of UK government for two years, in an attempt to find a solution to the production gap at our Newton Aycliffe manufacturing facility.

“Disappointingly these discussions have not resulted in a positive resolution,” the statement said. “We are now reviewing all remaining options available to us in order to keep our manufacturing teams building rolling stock to support the UK rail industry.”

Hitachi took a £64.8mn impairment against the value of the plant in its accounts for the year to the end of March 2023, as it signalled the production gap alongside supply chain pressures and rising inflation.

In Derby, Nick Crossfield, managing director of Alstom UK, warned the plant was on the brink of stopping production. 

“Between now and May, June we will go down to very little, or no, activity, in what is one of the group’s largest facilities worldwide,” he told the BBC this week. 

In a statement on Saturday, Alstom said: “We continue to work constructively with the government on securing a sustainable future for Derby Litchurch Lane, but after 10 months of discussions we have all but run out of time, and need to provide the much-needed certainty to our Derby staff and supply chain.”

The Department for Transport said: “The Government is committed to supporting the entire sector and is working with all rolling stock manufacturers, including Hitachi, on the future pipeline of orders which we expect to remain strong in the coming years.”