Two of the UK’s biggest train factories may be forced to lay off more than 2,000 workers as a lack of orders plunges the industry into crisis.
Redundancies have already begun at the Alstom factory in Derby, after production stopped at the historic site, which has been building trains in the same Victorian red brick sheds since the 1870s.
At the Newton Aycliffe factory in the north-east of England, Hitachi has warned it is also on the brink of laying off workers because it has no new orders and expects to run out of work within a year.
The factories’ plight is the latest stage in the slow-running crisis that has gripped the cash-strapped rail industry since the coronavirus pandemic. It also highlights the lack of central planning for train building in the UK, which has been a boom and bust industry since privatisation in the early 1990s.
More than half of all UK trains were replaced in the seven years leading up to the pandemic, as operators bought new rolling stock as part of their bids under the old franchise system. But there have been no significant orders — apart from some for HS2 — since the government bailed out operators during the pandemic.
“This is the worst I have seen in my 40 years in the industry,” said David Clarke, technical director at the Railway Industry Association, which represents companies in the supply chain. “It looks like the present situation is going to be quite difficult to recover unless there is some pretty rapid decision making”.
Both Alstom and Hitachi have spent more than a year unsuccessfully lobbying the government to order more trains to plug their gaps in production until 2025, when work on new HS2 high-speed trains is scheduled, which will be a joint venture between the companies.
But critically for workers in Derby and Newton Aycliffe, the government has failed to add extra orders on to existing contracts to keep a stream of work for the factories.
“There is a challenge to bridge the gap for the people on the factory floor who have just run out of work . . . you can’t keep all those people twiddling their thumbs for 12-18 months,” Clarke said.
While ministers have said they expect train companies to tender contracts to buy new trains worth £3.9bn in the near future, they have yet to formally sign off any new orders amid a cash crunch in the industry.
Not all UK train builders are in crisis. In Yorkshire, Siemens is about to start assembling new trains for the London Underground.
But Sambit Banerjee, joint chief executive officer of Siemens Mobility in the UK and Ireland, warned that more trains are needed for the wider UK railway.
“If we do not order new trains now, the problem from 2027 will be really critical. There will be old outdated stock which will need a lot of investment to keep them running,” he said.
In a letter to the industry in January, rail minister Huw Merriman said the first new major contract for trains since the pandemic would be for Southeastern railway and is not expected to be awarded until December at the earliest, according to a copy seen by the Financial Times.
Mark Swindell, chief executive of Rock Rail, which finances train orders, said institutional investors would be willing to put money into new trains immediately. “We are willing to take the financial risk that demand for train travel will grow over the next few years,” he said.
But ministers insist there is no quick fix. Mark Harper, transport secretary, last month said in a letter to the opposition Labour party that he could not update existing contracts “at the stroke of a pen” due to the risk of legal challenges and complexities of public procurement.
Back at Newton Aycliffe, Hitachi is still building trains but only has about 12 months of work left. It has warned the government that it has made contingency plans for job losses, according to a person familiar with the matter.
The factory employs 700 workers directly, and about 1,400 in the wider supply chain. Without new orders, redundancies are likely later this year as the factory begins to wind down, a person familiar with the matter said.
A spokesperson for Hitachi Rail said it “remained committed to working with all stakeholders to find a viable way forward for our state of the art manufacturing facility”.
Alstom is in a deeper crisis. It has put the UK government on notice that it is planning to mothball its historic factory in Derby, putting 1,300 jobs at risk. It is the only remaining site in the UK where trains are designed and built on site — most assemble trains with parts built outside the country.
The company this month resumed a redundancy process that it briefly halted at the turn of the year when it believed a government order was close.
Senior Alstom executives said they warned the government about the looming production gap 12 months ago, and said a small order for new trains for London’s Elizabeth Line would have been enough to tide them over until work began on HS2 stock.
“We just haven’t got a decision. At the end of the day we are a global business . . . our group is looking at this from a purely portfolio perspective thinking ‘well OK if there is no commitment in the UK we will put the investment somewhere else’,” Alstom’s Nick told Green Signals, a rail podcast, this week.
Among the workers leaving is Kevin Owen, who has taken voluntary redundancy after 36 years. He said 33 out of his nearly 40-strong group of welders are leaving.
“I 100 per cent assumed this would be a job for life . . . It has been quiet before, but there has always been something on the horizon. It has never got as bad as this,” he said.
Elaine Clark, chief executive of Derby-based industry body Rail Forum, said Alstom’s supply chain was being hit months before the manufacturer’s order book was completed.
“I don’t think that’s something the government fully got to grips with,” she said.
Rail Forum estimates the Alstom closure could put at risk between 5,000 and 7,000 jobs in the railway supply chain, many of them in SMEs across the Midlands.
Birmingham-based Solo Rail Solutions, for whom Alstom was a big customer, went into administration last month and Clark said she was aware of two similar collapses in the East Midlands.
The mothballing of the plant would also have severe implications for the local economy, which has been reliant on the rail industry since the Victorian era. It would “rip the heart out” of the country’s biggest rail cluster, said John Forkin, managing director of inward investment agency Marketing Derby.
He added that while Derby has Toyota and Rolls-Royce manufacturing sites, making it more resilient than it would have been in the past, the city “is synonymous with railways and for 185 years now there’s been a rail sector growing here”.
Councillor Baggy Shanker, Labour leader of Derby city council, said the local authority had been calling on government to act to save the plant for 10 months but said its pleas had “fallen on deaf ears”.
“The silence in a once vibrant and busy workplace is deafening and will hit this great industry, our city, and the wider Midlands economy extremely hard,” Shanker said.
He added that without government support “we will lose train making in the UK forever and put almost two centuries of local rail heritage at risk”.
A Department for Transport spokesperson said: “The government is committed to supporting the entire sector and we remain in close contact with Alstom and Hitachi to secure a sustainable future for rail manufacturing at Derby and Newton Aycliffe.”
They added that the transport secretary had “clearly set out the complexity of the procurement process”.
Read the full article here