Hitachi UK rail plant suffers multimillion-pound writedown

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Hitachi’s rail business has taken a multimillion-pound writedown on the value of its factory in the North East of England as fears grow over the future of Britain’s train manufacturers.

The Japanese conglomerate’s UK operation flagged a £64.8mn impairment against the value of its Newton Aycliffe plant in its accounts for the year to the end of March, which were published online last month.

The £82mn factory in County Durham opened in 2015 and is delivering trains for Avanti West Coast and East Midlands Railway.

But like other plants across the UK, it is facing a dearth of new orders from cash-strapped British train companies.

Hitachi flagged a “production gap” at the plant in its accounts, alongside supply chain pressures and rising inflation.

The accounts added that the writedown “should not be interpreted that Newton Aycliffe is entering into a period of cessation”.

Still, the news will add to the sense of crisis facing the UK’s train factories, and comes as industry warnings over major job losses have ramped up.

Alstom this week warned it only has six weeks of work left at its plant in Derby, and that some of its suppliers have already gone into liquidation.

The French company has said it is preparing for a “significant reduction in manufacturing activity” and consulted on more than 1,300 job losses including permanent staff and contractors.

“Major job losses are almost certain” if there are no new orders for trains soon, according to the Railway Industry Association.

The LNER east-coast franchise placed an order for 10 trains this year, but other than that there has been no major new business since the government sought high-speed trains for HS2 from Alstom and Hitachi in December 2021.

The future of that contract is now uncertain after the decision to cancel the second phase of the rail link.

Before the HS2 order, the most recent for the mainline train fleet was in December 2019.

“We are, I think, in crisis as an industry,” said David Clarke, technical director of the RIA. “We have had two orders in the last three years and neither of those is sufficient to plug the gap.”

The hiatus has come as the industry has faced a financial crisis following the pandemic, with the sector hit by the rise in homeworking.

Alan Strickland, Labour candidate for the new seat of Newton Aycliffe and Spennymoor, wrote to transport secretary Mark Harper a few days ago, saying the government was failing to support Hitachi.

“Instead the Tory government’s dithering and delay on HS2 and other rail projects has created major uncertainty for our proud rail industry,” he said.

Hitachi said in a statement: “We continue work with industry stakeholders and the UK government on opportunities surrounding new rolling stock orders such that we can continue to support and further enhance our investments here in the UK.”  

The government controls the industry’s finances and signs off on new orders. It has committed to supporting the sector and said it is “working with all rolling stock manufacturers on the future pipeline of orders”.

Rail minister Huw Merriman told parliament this week that a tender for new trains for the TransPennine Express route was launched this week and that contract awards are expected between late 2024 and early 2025 for other major orders.

But shadow transport secretary Louise Haigh said inaction had left “the future of rail manufacturing in the UK in doubt”.

“Ministers must now provide urgent clarity on the short-term rolling stock pipeline and the thousands of jobs that depend on it.”