Hitachi’s North East rail factory has fallen to a significant loss after saying that the value of its plant has fallen massively in a difficult market for the UK rail industry.
The Japanese firm has written down the value of its plant in Newton Aycliffe by £64.8m, though stresses that this does not mean the future of the plant is at threat. But the reduction in the plant’s value points to concerns over the future of the UK rail industry, with the Alstom plant in Derby at risk of closure due to a lack of future orders. Hitachi and Alstom in 2021 won the contract to build new trains for the HS2 line.
Last week one North East MP said the future of the UK’s train manufacturing industry was at risk and called on the Government to speed up orders for new trains.
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In accounts for Hitachi Rail for the year ending March 31, revenues rose from £527.9m to £717.0m. But profit before taxation fell from £274.3m a year earlier to £104.9m, and a previous operating profit of £188.1m became a £41.2m operating loss due to the factory revaluation and other factors.
The accounts say: “During the year ending March 31, 2023, a combination of direct and indirect factors continued to affect businesses and manufacturers in the UK, including supply chain pressures, a production gap and rising global inflation. These factors have all significantly changed the business environment, resulting in a situation where the company has been obligated to commission an impairment review of Newton Aycliffe manufacturing facility.
“This impairment review led to a reassessment of the carrying value of the Newton Aycliffe plant and a resulting write-down of £64.8m. This impairment should not be interpreted that Newton Aycliffe is entering into a period of cessation, instead it should be viewed as an illustration of the current challenges within the industry and will not have any operational impact on its ability to deliver current or future orders.”
Hitachi said it was working hard to complete current rolling stock orders, and that it had been working with the Government and other parts of the rail industry on future orders, particularly through investment in digital and green transport. It said its Operations, Service and Maintenance division had won a £300m contract extension from the GWR rail franchise to maintain trains until 2028.
Last week, County Durham MP Grahame Morris warned that trains would no longer be made in the UK and thousands of jobs could be lost if ministers did not speed up a bidding process for refurbishing existing vehicles.
Mr Morris, a member the Commons Transport Select Committee, made the warning after Alstom’s managing director for the UK and Ireland, Nick Crossfield, said it would be “very easy” for the company to decide to import trains into the UK if it believed domestic manufacturing is “too difficult”. He explained that Derby could be converted from a site employing 3,000 people and supporting 15,000 people in the supply chain to a facility that employs only 300 people responsible for just the final assembly of structures imported from abroad.
The Easington MP said: “Without immediate plans to allow companies to bid for new contracts, make no mistake: thousands of skilled jobs in the UK will go. The urgency stems from the crucial role of the Alstom factory in Derby. The Alstom factory is the UK’s only end-to-end design, build and test train manufacturing facility, making it integral to the UK’s rail manufacturing industries.”
He added: “If this Government do not expedite the bidding process, they will not continue to be manufactured in the UK. They will start to be manufactured in North America, or South America, or south-east Asia.”
Transport minister Mr Merriman told MPs: “We are aware that Alstom are facing difficult trading conditions, they are consulting their unions and employees on possible job losses. Whilst this must be a commercial decision for Alstom, the Government has been working with the company to explore options to enable it to continue manufacturing at its Derby site.”
A Hitachi Rail spokesperson said: “Hitachi Rail is proud to play a significant role in supporting the UK railways and it’s wider supply chain. We are busy delivering next generation intercity trains for passengers, while investing in battery technology and digital transport solutions. 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.”
Henri Murison, chief executive of the Northern Powerhouse Partnership, added: “Despite having certainty over long-term orders guaranteed by ministers, Hitachi needs more commitment to deliver the rolling stock required for the UK’s rail network in the coming years to secure employment in nearer term.
“The ageing trains on the West Coast Mainline are already being replaced for services to North Wales and cities including Liverpool by workers in Newton Aycliffe but more are still needed. The Department for Transport already has the option to buy them, they just need to press the button to go ahead.
“Recent issues on Avanti have made it plain that it is vital to invest in improving reliability and quality if we want to attract more passengers to the railways. Improving the trains serving destinations like Manchester would make a real difference in persuading people to get out of cars and onto the railways, increasing the revenue returned to the Treasury.”
